Looking for Alpha in Indian real estate

As US housing prices come down to more sustainable levels after a prolonged boom, one can only wonder if we can expect the same story to be played out in other economies. Maybe there is some alpha waiting to be picked up. One place that stands out from a sustainability perspective is India where real estate, whether residential or commercial, seems to have completely disconnected from local economic fundamentals.

Information Ratio and Sharpe Ratio

With the interest in hedge funds and other alternative investment mechanisms soaring, here is an attempt to provide an intuitive explanation for understanding and interpreting the Sharpe ratio and the Information ratio. They are both indicators of risk adjusted returns, and are ratios of mean returns to standard deviations of some flavor, but different from each other.

Foreign exchange reserves and the balance of payments

A couple of days ago someone asked about the balance of payments - and I thought of penning down some notes because simple though it is, the concepts do sometimes cause confusion as our Economics 101 gets rusty. A brief write up on how the current and capital account balances add up to the changes in forex reserves.

Automating Controls

As organizations stabilize their Sarbanes-Oxley efforts from frantic projects to stable, repeatable processes, teams responsible for compliance are facing significant pressure to rationalize and reduce the costs of instituting and running controls.

Controls are not only expensive to put in place and operate, they create further downstream costs such as increased audit hours and a decline in process throughputs. This article discusses some ideas on automating controls and reducing costs.

This article was published by ISACA (isaca.org) in their "Control" journal, Vol 2, 2007, and the copyrights to this piece already belong to ISACA.

Down-Round Financing

Venture funded businesses often need to keep going back to investors to seek multiple rounds of funding as business grows. All is well so long as the business is increasing in value and everyone is benefiting, but when projections do not turn out to be what the initial VCs and the founders thought they would be, subsequent rounds of funding often get raised at lower valuations. Down-rounds aren't fun, they are painful, involve difficult negotiations with initial investors, but are a reality every venture investor and entrepreneur needs to deal with particularly if business conditions aren't the easiest.

Why project management matters so much

This article discusses how projects add value to businesses, in fact I would argue that projects are probably the sole source of creating 'new' value given how future expectations tend to get priced into valuations. Project management is too important a task to be left to organizational 'b' players.

Living with risk

Risk management seems to getting more than its fair share of airtime everywhere. But what does it really mean? This article discusses what is the nature of risk, why it matters, and what should be done about it. This article was published by ISACA (isaca.org) in their journal in December, 2006, and the copyrights to this piece already belong to ISACA.

Using Excel to optimize controls to operate and test for Sarbanes Oxley

Sarbanes Oxley has created so much work for corporations and finance and audit folks that it is just mindboggling. One wonders if there is a way out to lessen the pain, and this article attempts to apply Excel based linear programming modeling techniques to arrive at a sub-set of controls for a company to operate and test. Incidentally this article has been accepted for publication in the March 2006 (Vol. 2) issue of the 'Control' journal published by the ISACA (Information Systems Audit and Controls Association), so they already own the copyrights to this piece.

Making choices - post merger systems integration

Dealing with mergers and newly acquired companies often means a lot of work in integrating the back end systems. The first step usually is to determine the course of action for integration, i.e., which systems to merge, which to drop and how to provide the technological infrastructure on which the combined business can be carried on. This article deals with the issues that the integration team will need to consider when deciding the course of action for systems in the merged entity.

This article appeared in print in March 2005 in the 'Control' journal.

Another Black-Scholes function for Excel

There are many of these out there on the web, so what the heck, why not another one. (What surprises me is some people charge for these things, wonder who buys from them, I probably would spend an hour or two building my own.)

This custom Excel based formula calculates option values for a European option with no dividends. What I like about this (other than the fact that I wrote it myself) is that it calculates everything in one go.

Graphing a P&L for an options portfolio

This spreadsheet model graphs the P&L at expiration resulting from a given portfolio of options in the same stock with the same expiry. I found this very useful when reading about options trading strategies - and while the graphs are there in the books, this is meant for those who need to check for themselves.

The strategy for trust in an 'e' world - cryptography and PKI

Trust is always an issue in business - people need to know who they are dealing with, and if they can rely upon information they are purportedly receiving from their business partners. In the real world, you 'know' people, or know their signature. But with modern networks rendering geography obsolete, and newer business models forcing corporates to do business with people they do not know, a rather old technique is coming to the rescue - cryptography. Used largely by governments and military in the past to keep secret messages from falling into the wrong hands, cryptography has today entered the mainstream with ordinary citizens often needing to use cryptography for their day to day needs. This article explains basic concepts behind digital signatures and certificates, and how they work.

Resource allocation and project portfolio optimization in an IT department

With many projects competing for the same resources in the department, resource allocation can be a major challenge. As part of my Executive MBA at Columbia, I built an Excel model to resolve this - mostly drawing upon my real life experience with the problem. I wouldn't say how often I ended up using this model myself, but I do think it does provide a fairly comprehensive analysis of the subject.

Workflow - leading business process automation

Workflow software has been around for a couple of years now, but it is only now that we see it maturing. The potential it offers for businesses is limitless - only if corporate managers realize what it enables and how they can leverage it to their advantage. This article discusses the revolutionary impact that workflow - combined with the falling costs of data storage, WANs, and imaging technologies - will have.

Designing a chart of accounts

In my previous company I helped our company's finance people by providing expert advice on the design of a new global chart of accounts - and this article is based to a large extent on that practical experience. I am also proud of the fact that article was published in the year 2000 in the journal of the Institute of Chartered Accountants of India - and you can get a pdf of the same here in .pdf format.

Efficient markets hypothesis in the forex markets

What a silly thing to check for. Of course there is no free lunch, no easy arbitrage opportunities in any markets - leave alone the largely electronic forex ones. But I built this 'model' as part of my Exec MBA, thought I will put it up here as a display of my modeling prowess!

Financial reporting, the strategic organizational challenge

Why does an organization need financial systems? What is the basic deliverable, and how does current technology lend itself to meeting those needs. This article discusses the strategic challenge corporations face with regard to their financial information, and how most meet them.

Offshore business process outsourcing - the 3rd party vendor landscape

As part of my MBA, I did a paper on offshore business process outsourcing. The paper is dated Dec-2002, so some of the figures are already a bit dated, but most of the ideas are valid even today. So here it is, for free, just like so much other literature is on the Internet.

Empowering with eFinance

The concept of eFinance has been around for a few years now - a web driven, automated finance function where all but the tasks requiring human and accounting judgement are carried out by accountants. This writeup looks at some of the conceptual issues around eFinance.

How offshoring benefits the West

Offshoring of business processes to lower cost countries is inevitable - so long as the west does not waver in its commitment to capitalism. No one - no lawmaker, no amount of media hype, absolutely nothing whatsoever can stop jobs from moving to India or China or the Philippines.

And this is actually beneficial to the West, as this article from the Economist argues, and I could not agree more.

Sarbanes-Oxley, aka full employment for lawyers, consultants & accountants

Sarbanes-Oxley (Sox) has created a nice little cottage industry of consultants helping companies to comply with its requirements. The regulators can be excused, for as the recent case at Parmalat proves, the contagion of poor governance and executive greed runs deep. This article provides an overview of the key Sox requirements where companies need external help to ensure compliance, and also the offerings on the market.

Shareholder value - a euphemism for lining the pockets of shareholders?

A committed capitalist - not a rich one though - I fail to see the silly arguments that I often read in the popular media occasionally about the interests of 'other stakeholders' (like employees) being sacrificed at the alter of shareholder value. A pointless debate to me - and here is why.