notes of bought ought dealings is not provided….and what is VAR margin??????

2 answers

Ravi Staff March 22, 2018

Bought Out Dealings
(i)  Companies may place its equity intended to be offered to the public with a sponsor member at a mutually agreed price through the Concept of Bought Out Deal,
(ii)  Thus after buying out the total equity, sponsor member would sell the shares of the company to the public through “offer for sale”,
(iii)  It ensures faster availability of funds to the company for timely completion of its projects and also a listed status on a later date.
VAR Margin
In certain segment, Value at Risk (VaR) based margining approach has been adopted. In the VaR system of margining, historical volatilities of scrips and overall market volatility is considered to arrive at a VaR margin percentage for a scrip.
VAR Margin is in principle same as Gross Exposure Margin

Gross Exposure Margin:
 
(On Securities-Wise Outstanding Position)
Gross exposure margin is computed on the aggregate of the net cumulative outstanding positions (purchases or sales) in each security.
 
(Changes from exchange to exchange)
Each Exchange determines its own rates of Gross Exposure Margin and Additional Volatility Margin based on its own risk perception of the market and other risk containment measures such as deposits and collaterals in its possession.
Simple Illustration

Script Name

Net Outstanding Position at day end.

Closing Price

Average Volatility of Past 6 months

GEM collected for 2 days as per volatility

Reliance

Short 10,000

800

1 %

10,000 x 800 x 1% x 2 = 1,60,000

Tata Steel

Long  20,000

700

0.5 %

20,000 x 700 x 0.5% x 2 = 1,40,000

Infosys

Long  30,000

900

0.75 %

30,000 x 900 x 0.75 % x 2 = 4,05,000

#1
Ravi Staff March 22, 2018

Table didnt come properly in above post so explaining one point

 Script Name — Reliance
Net Outstanding Position at day end.– Short 10,000
 Closing Price 800
Average Volatility of Past 6 months — 1 %
 GEM collected for 2 days as per volatility 10,000 x 800 x 1% x 2 = 1,60,000 

#2

Please login here to Submit Answer