Author Archives: rjainny

Look in the mirror

Just before the elections, I wrote a short note called “My Fears…” and sent it out to some friends.  It described my fears of the implication of a Trump presidency to our society and urged my friends not to vote for Trump. You can read this note here.

The note was partly in response to a sense I had that a larger number of people of South Asian heritage were voting for Trump than expected – a similar trend in with other minority communities.  Over the last several months I have found out that there were many Indian-American voters who actually voted for Trump.  This posting is for them.

To all the Indian-Americans that voted for Trump, I ask you a simple question – Look at yourself in the mirror and tell me what you see? 

Is there a big sign on your head saying you are a Trump supporter? I doubt it.  But I am sure you see a brown skinned person.  Now think about this – what do you think Adam Purinton or Chester Doles or Richard Lloyd or Deep Rai’s shooter sees?

Trump and his associates like Bannon and Miller have popularized and legitimized xenophobia, racism and hate. As someone aptly said, the stigma of being a racist has been lifted – it is now getting to be “OK” and “cool” to openly spew the vitriol of racism.

Jewish home spray painted with swastikas,   flyers distributed in several neighborhoods with the words, “Make America WHITE again-and greatness will follow”, notes in community center that read “WERE GONNA BLOW UP ALL OF YOU REFUGEES”, Swastikas all over a subway car,  attempted fire in Indian-American grocery saying “run the Arabs out of the country” – the list goes on.  The number of incidents of hate crimes against south Asians has risen to post-9/11 levels, however hundreds of smaller incidents are going unreported. You can read the article and download a report on this here

Across America, the rise in the populism of racism has emboldened certain people to come out of the margins and shadows.  For many years there has been the very slow process of marginalization of racists – however Trump and his gang have disrupted this progress and as Van Jones said, American is facing a “white-lash”.

So when they see a brown person it’s ok to shoot them as they may be muslim who Trump says are bad; when they see a brown person, they can blow them up as they may be refugees, who they are told are not wanted in American; when they see a brown person they can harass them as they may be illegal immigrants whom they are told are responsible for their job loss; when they a brown person its ok to set fire to their store as they may be Arab and should driven out and now it is ok for the police to take in a brown person going for a walk, albeit a respected scientist, for questioning for suspicious behavior  – and it goes on and on.

I have tried hard to understand why any Indian-American would have voted for Trump with this backdrop. The answers mostly seem based on a misguided view that Trump will be better economically and for their bottom line.  Even if that was true (which is highly debatable), what use is a few extra dollars if the society is torn apart, if you have no dignity and safety and are a third class citizen? What will those extra dollars do when your kids are harassed in school or when you are told to get out of this country?

Some of those that voted for Trump were swayed by the rhetoric of Islamophobia.  To those I once again ask – look at yourself in the mirror and tell me what you see.

So once again, to the Indian-Americans out there who voted for Trump, think about that young man in Kansas, who looked just like and me. Think about what kind of country you want to live in and bring your children up in and look in the mirror again – and ask yourself what do they see.

My Fears….

I wrote this on Nov 1st, 2016 and sent it to many of my friends as I was very concerned about a Trump victory and its impact on our society.

Every society and country has its share of bias, racism, bigotry etc. and America is no different.  However here we address and talk about these issues and try to effect change.  Such change may be frustratingly slow, but there is positive change nevertheless.  This is exemplified by Barrack Obama as our President and by men and women of all color, race, religion rising the highest positions in business, finance, education and government – which was unimaginable just 50-60 years ago.  But slow change can easily be derailed and now we sit at the cusp of an event of historical magnitude that could set this country back decades if not generations.

 This progress, the changing economy and demographics, has given rise to some that believe America only belongs to those descending from white European Christian roots. Trump’s messages have poisoned them with racist and xenophobic hate and given them voice, a pulpit, a medium – emboldening them to come out of the margins and openly spread their Trump legitimized hate.

 I fear a Trump America. 

 I fear for Mr. S., a turbaned Sikh who may be harassed in public, despite an illustrious service career in education as a professor in a major American University,

 I fear for Mr. N, a young autistic man who may be made fun of and bullied because Mr. Trump thinks it is funny to ridicule handicapped people

 I fear for Mr. H, an entrepreneur who is now getting hate mail and threats because of his Muslin faith, while through his company he has created thousands of good American jobs in economically disadvantaged areas.

I fear for young women who will be sexually harassed and their private parts grabbed because the President things it’s cool, or be treated just like a “piece of ass” the way he refers to his daughter.

I fear for Mr. D, a Jewish American businessman who may face new uprising of anti-Semitism, despite donating hundreds of millions of his personal wealth for causes around the country (while Trump has given almost none).

I fear for Ms. S, a black mother who now fears that her teenage son’s life will matter less and he will be profiled, randomly searched and not be able to travel the county without worrying about being beaten or harassed or called the “N-word” by white supremacists empowered by the occupant of the oval office.

I fear for Mr. M, small town barber of American of Mexican descent who always has a smile on his face and gives customers a great haircut – he will now be looked upon as a rapist and drug dealer, unfit to do his profession.

I could go on and on. 

But most of all, I fear for my children, who were born and brought up here. They stand up for the American flag and sing the national anthem.  What will I tell them when they are bullied in school or told to go back to their country? I have established roots for forty years, paid millions in taxes (unlike Trump) and contributed to society and I have told them that despite its faults, this is the greatest country in the world. How do I explain to them that the only country they really know may not want them because of the color of our skin?

If we make a mistake on Nov 8th, we could tear the heart and soul out of this country, we would tear apart the beautiful fabric of diversity that this country was built upon. If my fears come true, it could be the beginning of the end of the great American century.

Even if you believe an outsider can shake up Washington, Trump is not the one to do it – he represents all the corruption and abuse of the system that he pretends to be fighting against – and any miniscule benefit will be dwarfed by the potential destruction of our society, 

So please think about this – these fears and not just mine but should be all of ours. And please go out and vote on Nov 8th with a strong sense of human consciousness.

                                      RJ, A proud Indian-American citizen, husband and father of four

        (note: while the examples are all real people, their names have been hidden)

Efficient binomial model

my sources A consolidated, efficient and practical model for American options with discrete dividends

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The binomial model for pricing American option is well developed with a tremendous volume of research on the topic.  The original model does have several shortcomings which have been addressed by improvements and modifications.

However majority of the research has focused on independently analyzing one particular area or issue with the model, for example convergence, accuracy of greeks and handling of discrete dividends.

While each of these issues have several reasonable independent solutions, the goal of this paper is to construct one consolidated model that is efficient and accurate. The various models that fix single issues cannot be blindly “stitched” together without possible unintended affects.

Several approaches mentioned below, in particular while addressing the discrete dividend issue, rely on a large number of iterations.  The definition of efficiency is a practical model, that can be used in real time trading and risk applications to calculate options value, greeks and implied volatilities fast.

In this paper, the consolidated model developed will address several issues and suggest a practical, efficient and accurate model.

Click here to download the paper. Consolidated Binomial Model RJ 2015

Skew Vega

Skew Vega is the exposure of an options portfolio to a change in the implied vol skew, e.g. change in the risk reversal level. While teaching my daughter trigonometry, I realized that using some basic trigonometry, I could easily calculate the Skew vega in the case where there is no functional form (parameterized) volatility surface. Here is a simple and elegant model to calculate the skew vega

Calculating Skew Vega model

Factors detrimental to growth of options in India

The Indian options market is touted as a very large, liquid options market. The reality however is that the Indian options market is extremely skewed with a vast majority of the liquidity and volumes only in NIFTY options. The single stock options market remains without depth and liquidity and has not grown as would be expected from a mature market.
Stock options are a very important tool for both investment and portfolio hedging and are actively used by investors and market participants globally. Access to stock options enables investors to mitigate stock specific risk as opposed to simply broad market systematic risk by the use of Index options.
The lack of growth of stock options in India can be partially attributed to certain regulatory factors. This paper discusses these factor and offers suggestions on change.

I presented this paper to SEBI via a brokers association in India as well as discussed this with the exchanges several years ago.  However nothing came of it. I do expect this will be resolved in the years to come.

The full paper can be viewed here:

Factors detrimental to the growth of Stock options for hedging and investing


On Wisdom

If wisdom is innate, then by definition, everyone is “wise” – just too different extents based on our knowledge, experience and how we have used both of these to gain wisdom.

So when it suggested that we ask ourselves the question, “…what would a wise man or woman do…,  it begs the question,  how do you define “a wise man or woman”.   If wisdom is innate, then the original question could really be “…what would  I do..”

Since there is no objective and definitive measure of “a wise man” how can we even begin to think of what a wise man would do.  You can get a Phd in Physics and you will be a expert in Physics – this is objective.  But wisdom is relative and omnipresent, if it is truly innate – so the question of what would a wise man of woman do is somewhat impossible or thus redundant.

I have also heard the saying “… everyone is born a genius..”   My interpretation of that has been that every child is born with the ability to learn, to grow, to achieve – given the right nurturing, environment etc.   So if wisdom is innate, then the realization and exposure of that internal wisdom in us, requires the learning from our life experiences.   But one could make the same argument for courage and love.  So why wouldn’t those be considered innate? Or is there some definition of the threshold of stimulation that is required to bring these out in us – which defines which are innate.  The lower the threshold, the more innate?

We often hear about “..a wise old man..”.  That should not be confused with an intelligent person or one with a lot of expertise or knowledge in one or many areas.  Wisdom come from experiences that we learn from and which make us a “better” human being.  The wisdom to discern right and wrong, good or evil, meaningful or meaningless, ethical or unethical and so on.  We are not taught these, they are developed from our experiences and thus the view that wisdom is innate.  But then would the lack of these experiences at any point mean that wisdom is not possible at that point?  Then maybe Locke is right is saying that when we are born we are like a clean slate, a blank canvas.   But maybe wisdom is still there – like white light of the blank canvas. Our experiences over time bring out the colors and vividness on the canvas – but it all started from the existence of an innate wisdom.

On Education

ONE of the several traits, and arguably the most important one, that sets humans apart from the animal kingdom, is our desire for knowledge.   Humans have always had the insatiable need to learn about and decipher the world around them.  The result of this is why we have houses with heating and air conditioning, the reason we can travel by air, the reason we have electricity, the reason we have conquered many disease, the reason we have cell phones and the internet, the reason we have functioning societies and legal frameworks,

Thus we must not belittle the value of learning.   Our schools provide the foundation of such education and learning to prepare us to explore and learn new things as we go through life.  While many children feel that school subjects are pointless and a bore, they actually all have a reason and a purpose.  The sciences help us understand and explain the world around us, the mathematics gives us a sense of order and objectiveness, social studies help us understand society and where we came from and how we got here, languages give us the ability to communicate better with those around us.

Education and learning thus should always be given a priority and importance in your life.  That being said, you may not like every topic or subject you are asked to study, but the only way for one to know what is interesting is to be exposed to many subjects.   The world is extremely complex, and various fields of learning are constantly overlapping and interacting with each other.  Psychologists sometimes need the logic of math; scientists need the philosophical insight and the businessman needs to understand cultures and traditions.  Thus exposure and learning of many subjects is important at the school level.

Obviously there are other traits which set us apart as humans – such as our desire to be creative in music, arts, writing etc and our ability to appreciate this creativity.  No other animal creates varieties of songs and music, shapes and forms, expressionism etc.  And thus the exploration of the creative side is also important.  There are others like the philosophical and the physical side as well.

All these go hand in hand and are not mutually exclusive and the exploration or emphasis on one should not compromise the other.   As we grow, we may tend to focus more on one area of the other and sometimes there may be limitations preventing us from exploring some of these areas – but as human beings we must try not to consciously ignore any of these traits during our lives.

So make sure learning and education remain a priority – make sure you give them their due and your best effort and attention.   If you make learning a part of your life, then you will not see it as a chore or a bother – it is just natural.

In search of the best Vegetarian Dumplings in NY

The best vegetarian dumplings I ever had were in Jersey City at a small basement shop on Grove Street called Ducky’s & Dumplings.  The owner made all the food fresh on demand and the handmade vegetarian dumplings were incredible (as were the scallion pancakes).  But unfortunately the flooding from Sandy took out this restaurant.

So I decided to look for a replacement for my desire of vegetarian dumplings.

Note however that my reviews are limited to vegetarian dumplings.  Some of these places may have other food and dumplings that are far better or worse – but I only care about their vegetarian ones.


My search started in Chinatown.  I figured if you want dumplings, that should be the place to go.  There are many small, local noodle and dumpling restaurants in Chinatown and vegetarian dumplings are fairly common.  My criteria was approximately 8 dumplings within $10.  Unfortunately I had to skip the real local restaurants as all the menus and signs were in Chinese and no one in those restaurants spoke any English!

My first restaurant was dating chat on messenger Tasty Dumpling on Mulberry Street.  The name is right – but unfortunately everything stops there.  Typical self-serve type place that is extremely inexpensive.  For $3.50 I got 8 steamed vegetarian dumplings.  But even that was too much to pay for them.  They were extremely “doughy” and very light on the filling, which itself had a lot to be desired from as it was essentially cabbage chopped up.  They tasted like steamed dough balls that just stuck to my mouth. On top of that the soy sauce and hot sauce on the table was extremely watered down.   Definitely do not waste your time at this place

The next week I visited Vanessa’s on Eldridge Street off of Grand. Vanessa’s is extremely busy, with a constant flow of customers  – mostly tourists, mixed in with a few preppie couples from Soho and many hipsters  – but surprising very few Chinatown locals.   This is probably because of Vanessa’s digital footprint – it appears in most internet food sites and has received very good reviews – and deservedly so.  The vegetarian dumplings were green in color due to the spinach infused whole wheat dough,  the filling was a tasty mixture of cabbage, carrots, mushrooms, ginger and some herbs like coriander – and they did not skimp on the filling, The dough was consistent and boiled to the right consistency.  Despite the long wait, watered down soy and hot sauce, I was quite happy with my $4 for 8 dumplings

A few days later, while walking in midtown, I came across Hibachi Dumpling Express on 6th avenue. Fairly new, clean looking place was quite inviting.  So I decided to try their dumplings.  Unlike the vegetarian dumplings in Chinatown, they offered potstickers, i.e. pan fried dumplings.  However making good potstickers is an art.  They have to be panfried just the right amount with care to make sure they are well cooked all around.  While they smelled and looked good and were cheap – they were terrible.   One side was burnt while the rest was under cooked.  The filling was mediocre.  I ended up throwing away most of them.   They clear have not mastered the art yet.

Back to Chinatown.  This time to a Dim Sum and Tea Parlor called Nom Wah on Doyers Street, a tiny lane off of Chatham Square. This was a nice sit down place with table service.  The selection of teas was awesome, but most of all, the service was incredible. Very welcoming with an old school attitude. They made a mistake and under billed me, so when I pointed it out, they thanked me and said “on the house!”.   And their dumplings?  Excellent.  While a little more expensive ($4 for 3), they were noticeably larger.  Made from a tapioca wrapper and filled with a mixed vegetable filling, they were definitely the winner so far.  Topped off with a nice cup of tea made for a delightful and inexpensive meal.

One more stop in Chinatown – Prosperity Dumpling on Eldridge off of Canal.  Tiny hole in the wall, but extremely popular, with people standing outside eating – possibly because of how cheap their food is.  But their vegetarian dumplings had a lot to be desired from – very similar to Tasty Dumplings mentioned above – and right with them in the do not bother category.

Well, time to try some other areas.  I hear of some good places in Sunset Park, Brooklyn – but that’s a bit of a hike for me – so hopefully I will get out there one day.

Volatility surfaces for risk and OCC portfolio margin

Calculating the current implied volatility of an option or the entire options chain of listed options is quite straightforward. However the use of these implied volatilities in risk measurements has varying implications.  This article studies how different volatility surface methods can result in very different stress risk calculations for an equity options portfolio. Furthermore is shows the impact on portfolio margin calculations. Several years ago, Customer Portfolio Margin was introduced for equity options positions.   The margin calculations are performed by The Options Clearing Corp (“OCC”) using their TIMS methodology. The methodology is stress test based, where each underlying is shocked by various percentage moves, typically about 8% for indices and 15% for single stocks.  The worst case loss for each underlying is calculated and aggregated using some aggregation logic.

Since it is stress test based the implied volatility surface used to perform the simulations plays an important part in the results.  For many years the OCC followed a methodology of cleansing options closing prices to ensure no arbitrage conditions occurring and they employed certain volatility surface corrections to ensure reasonable stress tests.However in mid 2014 the OCC changed their methodology, and the volatility surfaces are no longer smoothed.  The result of this has been deterioration in the portfolio margin results in some cases.  The margin requirements for many deep out the money options jumped dramatically, simply due to the implied volatility used for them bring exorbitantly high.  Lack of smoothing retains the “kinks” in the volatility surface in the stress calculations – resulting in many cases where further out of the money options have greater margin requirement than strikes closer to the money.  Thus certain long call or long put spreads were actually being assessed as requiring margin, which should never be the case. Such irregularities in the portfolio margin calculations are disturbing as many firms rely on the accuracy and consistency of the calculation from the OCC.

Link to the full research article is below

Volatility surfaces for Risk and OCC margin

What Ails Market risk management – March 2008

I wrote this article back in early 2008, before the financial crisis.  It appeared in Wilmott magazine in April/May 2008.

The article explores some of the shortcomings in the market risk analysis practice at most financial institutions.  It presents several ideas on how to improve the actual process of producing market risk numbers.  It is focused on the practical aspects of market risk managemen


Looking back at this article in the post-2008 world,  it highlighted several issues that really came to light after the crisis – in particular the use of too short a historical lookback for VaR and stress tests, the importance of the outliers in a VaR PL distribution (now use of CVaR is common)  and the need to incorporate more risk factors.

The link to the article is below:

What ails market risk management