Staying Afloat

It is 7 pm like every evening in the last 3 weeks I am waiting for the Hotel car to arrive at the gate of the MIDC Mumbai office. It has started raining though the showers are light my glasses are losing their visibility how I hate wearing glasses in the rain but it is a must for me when I travel. The three weeks have come to an end finally. Mumbai the city where millions arrive every day to chase their dreams but the Mumbai I saw was so different from what I had imagined. This city did surprise me in so many ways. I was lost in my thoughts when finally the car arrives I put my heavy bag inside and jump in by this time most of the drivers were familiar to me. “madam room no?” and we started moving at 40 km/hr or maybe much less the rain has started pouring and all I could see were the headlights of the swankiest cars I have seen at a single traffic signal not only in India but by any global standards the autowalas as they are referred in our country looked anxious so did the people crossing the roads this massive crowd of people all running towards home which will take them hours to reach.I was going home too but  I was in no hurries my flight was in 4.5 hrs I looked back and confirmed. Taking a turn close to  the hotel were series of the most expensive hotels in the city in a row the driver said and that you see madam is the hotel Leelala Palace 7 stars madam where are you from asked in a quiet confident voice . “Where do I come from?” this is one of the toughest one to answer “I come from the small village Bagdogra where I spent my  10 odd years and most of my memories growing up are based in this place or I come from the small town of Siliguri where my passport says is my permanent address or I come from the city of Kollkata where I worked for so many years and was my last address in India…

For a more practical choice I uttered Sydney.. I mean Australia. Will this always be my answer for all the years to come??

Last one year was quiet a mix of good and bad times looking back I realize life was tough there was not a single day I had not applied for a Job. Being a fresher in the field of finance and not ready to take up any odd jobs was taking a toll on me but finally I got it. Here I am on the 20th floor of Australia square one of the iconic buildings in Sydney typing these lines when someone just popped the question “how was Mumbai?” I replied “Traffic is bad load of people but there is a lot of money” and the answer was “If you are saying so being from there” It is difficult for someone to understand Mumbai was only a name of a place for me till now or a city I have seen in movies so many times. The speed, the hustle the noise the people everything was quiet new for me too. As the flight finally started moving and  I realized we have left the ground I realized that just speaking the same language or being of same color or having the same names does not make you your own. As I made my way through the immigration the smile of the immigration officer made me feel knowingly or unknowingly realize how much this country has made my life easier and taken care of me and provided me opportunities and that I would like call it my home for the coming years.

Every year since I have left India had been equally adventurous and I have never embraced life as I have done for these years. Few days back I have started learning how to swim I am 30 plus years old and yes I did start without the help of an instructor just by watching you tube videos though I got this idea from one of my friends. I float on my back effortlessly close my eyes and let my limbs float .Keeping afloat is a challenge you need to relax and let go I guess this has a striking resemblance with how we should live life. Let go of the things we have no control over and let our mind stay in peace at the end life is so much more simple than we think it is and few things falling into place makes things so much better.

The Little RED bag

I am sure many women like me hesitate to buy the color red when it
comes to picking up that dress or simply a pair of high heels or
simply a pair of red shoes. Red is quite a risky color if gone wrongit can go from classy tasteful to cheap and if not disastrous,
loud. How many of you ladies out there have tossed with the idea ofnot sure where and in what to wear the color red?

One of these days I was shopping for a bag that was small more like a
grab handle plus across body strap and I came across this sweet little bag at Ruby & Kit
in two colors black and red.
I don’t buy big brands except for sunglasses and watches when it comes
to accessories.

After a lot of confusion, tension anxiety and almost coming down to a
nervous breakdown I decided to go with the color RED.
Here are some of the reasons why and how can a bright colored
accessory like hand bag, a tote can make a huge difference.

You can wear that casual pair of black shorts and grey top and not
completely be invisible with this pop of color so forget the myth that
red is for that cocktail evening wear or for the people who always go
for high street fashion or the long coveted stilettos.

So all you ladies out there if you can’t have it all in red but you
should know  "A red bag cannot go wrong".
A good bag can fix a bad day!

Bond Duration Calculation

As the name suggests it is the time frame an investor has to wait till he receives the cash payments. In case of a zero-coupon bond the duration automatically is same as the maturity years but in case of a bond with a coupon the duration is less than the number of years to maturity as the investor receives some of the cash before the maturity.

Let us take an example of a 7 year old bond with a coupon of 5% with a price of $95 and a yield of 12 %. We can demonstrate the cash flows and timings of the bond as follows

                                 5%           5%          5%          5%           5%          5%           105%

                            Year 1       Year 2   Year 3     Year 4      Year 5        Year 6      Year 7

                                                                               

               

We can calculate the average time to the cash flows weighted by the cash flows themselves:

       (5 *1) + (5*2)+ (5*3)+ (5*4)+  (5*5)+ (5*6)+ (105*7)  

                                (5+5+5+5+5+5+5+105)

=     6 years

                            

Macaulay’s Duration is very similar in calculation except that we are going to use the present value of each cash flow by discounting each cash flow by the yield of 11.063%

Principal	100
coupon	5%
yield	11.063%
Years	coupon	Pv of CF	PV of CF*time to Cash flow
1	5	4.50	4.50
2	5	4.05	8.11
3	5	3.65	10.95
4	5	3.29	13.14
5	5	2.96	14.79
6	5	2.66	15.98
7	105	50.37	352.62
	sum	71.49	420.10
	duration	PV of CF*time to Cash flow/PV of CF	5.88

*PV Present value CF cash flow

Duration demonstrates the price-sensitivity of the bond as well as can be used for Immunization.

When you invest in bonds and there is a fall in the yields you lose because you won’t be able to earn as much you had expected on the reinvestment on the coupons received. If the bonds are held to maturity your total returns are less than you had expected this is called Reinvestment risk.

Modified Duration

The calculation is based on the fact that the sensitivity of the bond price to yield changes is dependent on how steep the price/yield curve slopes.

                                        Modified Duration = Macaulay’s Duration/ (1 + YTM/ N)

Where YTM = yield to maturity

             n = no. of coupons per year

So for the previous example of the bond we had considered the Modified duration will be

n = 1 ( as the bond has an annualized coupon)

YTM =11.063%

5.88 / (1+.11063) = 5.29

Modified Duration is also known as Volatility in some markets.

The change in price of a Bond can be approximated to

                              Δ Price = - (dirty price * Δ yield *modified duration)

For example,

If we assume that the yield rose from 11.063 % to 12.063% 1% yield the

Δ Price = - (95*.001*5.29) = -5.07

So, we can expect the price to drop to (95-5.07) = 89.97

Therefore, we can see that higher the duration the higher the bond is sensitivity to the yield change.

Portfolio Duration

We can use the Modified Duration for a single bond or a portfolio of bonds. A portfolio’s modified duration gives the sensitivity of the portfolio to the yield changes. A portfolio’s modified duration will give the sensitivity of the portfolio’s Value to the change in yield. With this knowledge an owner of a portfolio can match the modified duration between assets and liabilities to hedge the risk.

Let us consider an example for the following portfolio

	Face Value	Dirty Price	Modified Duration
Bond A	2 million	95.45	5.35
Bond B	1 million	105	7.20
Bond C	3 million	98.2	3.45

= - Δ yield * ((2 million *95.45/100*5.35) + (1 million *105/100*7.20) + (3million*98.2/100*3.45))

Now we have a Bond D to short and immune the above portfolio

	Dirty Price	Modified Duration
Bond D	110.2	9.75

To offset the change in value for a small parallel yield change we need to short D equal to

= - Δ yield *(Face value of bond D *110.2/100*9.75)

ð  Face value of bond D = 2.6 million

All the above calculation is based on the assumption that the movement of the yield curve is parallel along the yield curve. In real world that is not the case the yield curve does not fall or rise as a straight line this is known as Yield curve risk. The difference between the actual and the estimation depends on the degree of the curvature and this is known as Convexity (which I will hopefully discuss in my next article).

The Southern hemisphere

The Flight attendant just announced that we will be landing soon and that we should straighten our seats and fastens our seat belts I was woken from a deep sleep and for a moment I could not recollect where I was and where am I heading towards. Just how my life had been for the last few years I never knew where I was heading but the best years of my life. Sitting at Changi International Airport I was deep in thought how life had been 3 continents 3 countries in less then 2 years is this really happening?

Relationships, bonding, family and friends have changed meanings so much in these years. I was again leaving India for the second time this two months stay made be so much believe I so much not belong to the place I was born and brought up for 27 long years as the saying goes “Some journeys takes you further from where you come from, but closer to where you belong” I guess that is exactly what had been happening with me all these years I was so scared of being judged all the time felt that what I was doing was wrong and doing things to show how right and happy I am like most of the people are still doing right there somehow some are honest enough to admit it and some are so convinced like  Trueman Burbank in the Truman show .

Finally I have understood and can appreciate the fact how important is to do things for yourself and not just to look successful in front of others. The fear of being judged has finally gone and I feel so relieved I don’t need a certain salary, house, job, degree, kids or anything else to prove anyone how successful I am. There are nothing like a check list (bucket list) to show that u are an achiever.

I was always so scared of people knowing that I can commit a  mistake like everyone does and today I can scream out and say I had my share of doing things which seemed right than now with the law of nature I have changed and so has my choices and for making myself happy I need to accept my mistakes and rectify I am more than happy with that. True happiness comes from moments that make you feel like a feather free, floating and carefree anything that burdens you down, makes u pretend, is just the unwanted luggage you are carrying around.

This year I actually visited quite a few number of places including one of the places I always wanted to go. I have shook hands with dolphin went to the highest motor able road on earth and guess what finally I have reached the southern Hemisphere where finally I would celebrate the Christmas in hot summer it has been a little over a week I am here in this new city of mine I am thrilled and excited to see the amazing places this country has ….Looking forward to a new adventure Bis Bald !

Journey Continues

Statue of Liberty

It is 9:40 EDT in New York City I am late for the liberty cruise trip as if pacing up with every tick of the watch on my hand I am trying to run faster and faster, yes that is what my life had been for the last one year. The most memorable one year of my life and the toughest one still feels like it was yesterday that I was struggling with my 110 kilos of luggage in Charles De Gaulle Airport and marked  my never ending struggle. With my two or three phrases of French ( I am not sure those qualify as phrases :)) I  could survive in France makes me immense proud but again honestly it was not without these awesome friends I made ( my blind dog ) I know if she is reading it she will be laughing I wouldn’t have survived  that long.

Acropolis, Athens

I have lived life for the first time in so much of freedom and stress. Missed my first train and flight too drank my first cocktails without worrying of not be scrutinized wore my shortest outfits without people gazing at me all time, have travelled back home alone at 2 am in the morning alone and the worst was walking bare foot on the street after taking of my painful heels . I have taken 20 subjects in 7 months have done 8 hrs of classes for the first time in my life,have done sign language talking with a large number of people and laughed  as they laughed too, have  worked like a dog every day and cried in frustrations too J.

I have now friends from every continent and from countries of which I had heard only the names. Have cooked for my  friends rice, moosor dal and nuggets  who havenever have seen dal in their life . Felt thrilled when my friends addressed dal as yellow sauce and asked the name of nan ( the cheese bread) every time they forgot . Made “gajar ka halwa” popular in Colombian households  as “ Carrot dessert” and suggested the replacement of Ghee with butter .I  have met the most warm and awesome people of my life during this time.

Belem, Lisbon, Portugal.

I am lucky to have lived the life I always dreamt of the life of a traveler who has weird stories to tell , small adventures and  atleast see the world as much as possible in this life but I have very less time in hand I have started late but its better late than never . Atleast I have 2 suitcases for my belongings  to survive on let me live with it and live life to the fullest because when I die I will go empty handed.