Financial Aspect of Market Risk Management Relating to Bond
16 Pages Posted: 25 Sep 2013 Last revised: 17 Dec 2013
Date Written: September 22, 2013
The Indian financial system is not well developed and diversified. One major missing element is an active, liquid, and large debt market. In terms of outstanding issued amount, Indian debt market ranks as the third largest in Asia, next only to that of Japan and South Korea. Further, in terms of the primary issues of debt instruments, Indian market is quite large.
For too long, most of the corporate entities have been depending on loans from banks and institutions and they have not shown any interest to raise at least a small of the required resources from the market through bonds or commercial paper.
One of the important lessons of the recent Asian crisis was that banks did not pay any attention to protecting themselves from the currency and asset liability mismatches, especially arising from those of their domestic currency loans based on the their foreign currency borrowings.
NSCCL has in place a fairly complex risk containment mechanism. Until 2nd July of this year the equity market in India followed an account period trading system under which the trades during the week were netted at the close of the trading cycles and were settled after a week.
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