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INDIAN STOCK MARKET: AN OVERVIEW

Stock Market
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Primary Market

Secondary Market

PRIMARY MARKET
IPO

vs Seasoned Issues Pricing of issues

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Fixed pricing Book building

Public

offer vs Private placement Demat issues

PRICING OF ISSUES

Companies eligible to make public issue can freely price their equity shares or any security.
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Fixed Price Book Building

FIXED PRICE
In

the fixed-price issue method, the issuer fixes the issue price well before the actual issue. For this very reason, it is cautious and conservative in pricing the issue so that the issue is fully subscribed. Underwriters also do not like the issue to devolve on them and hence favour conservative pricing of the issue. For these practical reasons, the issue price in the case of traditional fixed price method generally errs on the lower side and, therefore, in the investors favour.

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BOOK BUILDING
Book-building is a process of price discovery used in public offers. The issuer sets a floor price and a band within which the investor is allowed to bid for shares. The upper price of the band can be a maximum of 1.2 times the floor price. The investor had to bid for a quantity of shares he wished to subscribe to within this band.

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BOOK BUILDING
Bids to remain open for at least 5 days Only electronic bidding is permitted Bidding demand is displayed at the end of every day. The lead manager analyses the demand generated and determines the issue price or cut-off price in consultation with the issuer.

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CUT-OFF PRICE
The

cut-off price is the price discovered by the market. It is the price at which the shares are issued to the investors. Investors bidding at a price below the cut-off price are ignored.

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 Lets

say a company wants to issue 10,00,000 shares. The floor price for one share of face value, Rs10, is Rs48 and the band is between Rs48 and Rs55. At Rs55, on the basis of bids received, the investors are ready to buy 2,00,000 shares. So the cut-off price can not be set at Rs55 as only 2 lacs shares will be sold.

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 So

as a next step, the price is lowered to Rs54. At Rs54, investors are ready to buy 4 lacs shares. So if the cut-off price is set at Rs54, 6 lacs shares will be sold. This still leaves 4 lacs shares to be sold.

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 The

price is now lowered to Rs53. At Rs53, investors are ready to buy 4 lacs shares. Now if the cut-off price is set at Rs53, all ten lacs shares will be sold. Investors who had applied for shares at Rs55 and Rs54 will also be issued shares at Rs53.

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FIXED PRICE VS. BOOK BUILDING

Fixed Price 1. Book Building Demand can be known at the end of every day but price is known at the close of issue. Aggressive pricing (High Price) No pressure of unsatisfied demand in the market. It favours the issuers. The price is known in advance 1. to investor and the demand is known at close of the issue. Conservative pricing (Low 2. price) Generally oversubscribed 3.

2.
3.

4.

It favours the investors

4.

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BOOK BUILDING
Objective is efficient price discovery. Asymmetric information between promoter and investors. Investors always remain in dark.

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PRIVATE PLACEMENT

It involves issues of securities to a limited number of subscribers, such as banks, FIs, MFs and high net worth individual. It is arranged through a merchant banker, an agent of issuers, who brings together the issuers and investor(s). Securities offered are exempt from public disclosers regulations and registration requirements of the regulatory body. This market is preferred by small and medium size firms, particularly new entrants who do not have track record of performance.

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PRIVATE PLACEMENT VS PUBLIC ISSUES

Private Placement 1. Public Issues Issues are primarily offered to retail investors. Issues are offered to mature 1. and sophisticated institutional investors. No discloser requirements. 2. Issues are not screened and this increases the risk. 3.

2. 3.

Discloser requirement there. All issues are screened.

is

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DEMATERIALISATION OF SHARES:
Trading in the shares of the Company is compulsory in dematerialized form for all investors. The Company has, therefore, enlisted its shares with both the depositories, viz, National Securities Depository Limited (NSDL) and Central Depository Services India Limited (CDSL).

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WHAT IS DEMATERIALISATION?
Dematerialisation

is a process by which the physical share certificates of an investor are taken back by the Company and an equivalent number of securities are credited in electronic form at the request of the investor. An investor will have to first open an account with a Depository Participant so that the dematerialised holdings can be credited into that account. This is very similar to opening a Bank Account.

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WHAT IS A DEPOSITORY?

A Depository (NSDL & CDSL) is an organisation like a Central Bank where the securities of a shareholder are held in the electronic form at the request of the shareholder through the medium of a Depository Participant.

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WHO IS A DEPOSITORY PARTICIPANT?

A

Depository Participant (DP) is your representative (agent) in the depository system providing the link between the Company and you through the Depository. While the Depository can be compared to a Bank, DP is like a branch of your bank with whom you can have an account. According to SEBI guidelines, Financial Institutions like banks, stockbrokers etc. can become participants in the depository.

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HOW DOES THE DEPOSITORY SYSTEM OPERATE?

The

Depository System functions very much like the banking system. A bank holds funds in accounts whereas a Depository holds securities in accounts for its clients. A Bank transfers funds between accounts whereas a Depository transfers securities between accounts. In both systems, the transfer of funds or securities happens without the actual handling of funds or securities.

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SECONDARY MARKET
Trading Clearing &Settlement

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TRADING
Cash Trading Spot Trading Forward, future (derivative trading)

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TRADING
The NSE trading system called 'National Exchange for Automated Trading' (NEAT) is a fully automated screen based trading system. It is on line and nationwide trading system. It adopts the principle of an order driven market.

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TRADING MECHANISM
In this system a member can punch into the computer quantities of securities and prices at which he likes to transact. The transaction is executed as soon as it finds a matching sale or buy order from a counter party.

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TRADING MECHANISM
A

single consolidated order book for each stock displays, on a real time basis, buy and sell orders originating from all over the country. The book stores only limit orders, which are orders to buy or sell shares at a stated quantity and stated price. The limit orders are executed only if the price quantity conditions match.

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THE LIMIT ORDER BOOK FOR TITAN ON THE NSE (ON 12 APRIL, 2005, AT 11.00 A.M.)
Buy Qty Buy Price Sell Price Sell Qty

95 25 100 10 150

237.25 237.20 237.15 237.10 237.00

237.70 237.90 238.00 238.20 238.25

129 72 827 50 10

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One can buy a share by paying Rs237.7 and sell a share at Rs 237.25. The difference is the bid-ask spread. There is one potential complication to this simple scenario. The prices of Rs237.25 and Rs237.7 actually represent commitments to trade up to a specified number of shares. If somebody wants to buy 150 shares, what will happen?

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LIMIT ORDERS

Investors may also place limit orders, whereby they specify prices at which they are willing to buy or sell a security.

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LIMIT ORDERS
Condition Action

Price below the limit Limit-buy Order Stop-Loss Order

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Price above the limit Stop-Buy Order Limit-Sell Order

Buy

Sell

Limit-buy Order and Limit-Sale order Limit-buy Order If the stock falls below the limit on a limit-buy order then the trade is to be executed. See the price list of Titan: Somebody has placed a buy order for 25 shares of Titan at Rs237.2 per share. If price falls to Rs237.2 (from its current level of Rs237.25), then this buy order will be executed. Limit-Sale order?

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What happens if a limit order is placed between the quoted bid and ask prices? Suppose you have instructed your broker to buy Titan at a price of Rs237.4 or better.

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TRADING MECHANISM
The trading system provides tremendous flexibility to the issuers in terms of kinds of orders that can be placed on the system. Several time related (Good-till-Cancelled, Good-tillDay, Immediate-or-Cancel), and Price-related (buy/sell limit and stop-loss orders) conditions can be easily built into an order.

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STOP-LOSS ORDERS
It is an order placed with a broker to sell once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. Setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%. For example, let's say you just purchased ACC at Rs50 per share. Right after buying the stock you enter a stop-loss order for Rs45. This means that if the stock falls below Rs45, your shares will then be sold at the prevailing market price.

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MARKET TIMINGS
Trading

on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the equities segment are: Normal Normal Market Market Open Close : : 09:55 15:30 hours hours

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CLEARING AND SETTLEMENT PROCESS AT NSE

NSE
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DEPOSITORIES BANK
10 5

8
6

NSCCL

9
7

CLEARING

11

CUSTODIAN / DP

CLEARING AND SETTLEMENT PROCESS

1. Trade details from Exchange to NSCCL 2. NSCCL notifies the consummated trade details to custodians who affirm back. Based on the affirmation, NSCCL determines obligations. 3. Download of obligation and pay-in advice of funds/ securities. 4. Instructions to clearing banks to make funds available by pay-intime. 5. Instructions to depositories to make securities available by pay-intime.

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CLEARING AND SETTLEMENT PROCESS

6. pay-in of securities (NSCCL advises depository to debit pool account of custodians and credit its account and depository does it). 7. pay-in of funds (NSCCL advises Clearing Banks to debit account of custodians and credit its account and clearing bank does it). 8. Pay-out of securities (NSCCL advises depository to credit pool account of custodians and debit its account and depository does it). 9. Pay-out of funds (NSCCL advises Clearing Banks to credit account of custodians and debit its account and Clearing

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CLEARING AND SETTLEMENT PROCESS

Custodians ( for A who is buyer and for B who is seller) Clearing bank records the following entries: (for 7) Custodian ( for A) A/C Dr To NSCCL A/C (for 9) NSCCL A/C ..Dr To Custodian (for B) A/C Depositories record the following entries (shares): (for 6) Custodian ( for B) A/C Dr To NSCCL A/C (for 8) NSCCL A/C ..Dr To Custodian (for A) A/C

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SETTLEMENT CYCLE
ROLLING SETTLEMENT
At

NSE and BSE, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the settlement day all intervening holidays, which include bank holidays, NSE holidays, Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled on Wednesday, Tuesday's trades settled on Thursday and so on.

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A TABULAR REPRESENTATION OF THE SETTLEMENT CYCLE FOR ROLLING

SETTLEMENT

Activity Trading Clearing Rolling Settlement Trading Custodial Confirmation

Day T T+1 working days

Settlement

Securities and Funds pay in

Securities and Funds pay out

T+2 working days

T+2 working days

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INDEX-BASED MARKET-WIDE CIRCUIT BREAKERS (W.E. FROM JULY 2001)

The

index-based market-wide circuit breaker system applies at 3 stages of the index movement, either way viz. at 10%, 15% and 20%. These circuit breakers when triggered, bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier.

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DURATION OF TRADING HALT (IN MINUTES)

% movement in either indices in either direction 10 15 Before 1 p.m. 1 p.m. to 2 p.m. 2 p.m. to 2.30 p.m. After 2.30 p.m.

60 120

30 60

30 Trading halt for the remainder of the day Trading halt for the remainder of the day

No halt Trading halt for the remainder of the day Trading halt for the remainder of the day

20

Trading halt for the remainder of the day

Trading halt for the remainder of the day

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RISK MANAGEMENT MARGIN MONEY

Categorisation of stocks for imposition of margins

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The Stocks which have traded atleast 80% of the days for the previous six months shall constitute the Group I and Group II. Out of the scrips identified above, the scrips having mean impact cost of less than or equal to 1% shall be categorized under Group I and the scrips where the impact cost is more than 1, shall be categorized under Group II. The remaining stocks shall be classified into Group III.

 The

impact cost shall be calculated on the 15th of each month on a rolling basis considering the order book snapshots of the previous six months. On the basis of the impact cost so calculated, the scrips shall move from one group to another group from the 1st of the next month.

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For

securities listed for < 6 months, the trading frequency and the impact cost shall be computed using the entire trading history of the security.

WHAT IS IMPACT COST?

What is impact cost? It is the cost of executing a transaction on the stock exchanges.
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Suppose you want to buy 150 shares of Titan. You would be able to buy the first 129 shares at a price of Rs237.7 per share. However, to buy the remaining 21 shares, you have to pay Rs237.9 per share. The higher the number of shares that you want to buy will have an impact on the price of the stock. This is measured by what is known as the impact cost of the trade.

The average buy price for 150 shares= (Rs237.7x129 + Rs237.9x21)/150 = Rs237.728 The average of the best bid and ask price is given by Rs 237.475. You should ideally expect to buy or sell shares of Titan at this price. The impact cost of the order is therefore given by: Impact cost = (237.728 237.475)/237.475 = 0.106%

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What does impact cost signify? It means you incurred a cost of 0.106% to buy 150 shares because of the liquidity conditions in that stock. The more liquid a stock is the lower its impact cost.

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VALUE AT RISK MARGIN

Security VaR Margin Group I The scrip wise daily volatility calculated using the exponentially weighted moving average (EWMA) method on daily return. The scrip wise daily VaR margin would be 3.5 times the volatility so calculated subject to a minimum of 7.5%.

Group II The VaR margin shall be higher of scrip VaR (3.5 sigma) or the index VaR (3 sigma), and it shall be scaled up by square root of 3. Group III The VaR margin = 5 x the index VaR x
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3.

INDEX VAR

The index VaR would be the higher of the daily Index VaR based on S&P CNX NIFTY or BSE SENSEX. The index VaR would be subject to a minimum of 5%.

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COMPUTATION VAR
Calculate the daily logarithmic return of share Ri = In (Pi / Pi-1) Compute the initial volatility by calculating the standard deviation of returns for the one year period using the formula SD = 0 = [ 1/n {Ri E(Ri)}2 ]

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i 1

Calculate the daily volatility for he subsequent days using EWMA mothod. For day 1, the volatility will be 1 = [ (0 )2 + (1 ) R12 ] For day 2, the volatility will be 2 = [ (1 )2 + (1 ) R22 ]

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Daily VaR for individual scrip = 3.5 sigma Daily Var for index = 3 sigma A higher SD level is used for the script because the script is expected to have higher volatility as compared to the index, which is a portfolio. The volaility estimate at 3 sigma level represents 99% VaR.

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BUYING ON MARGIN
SEBI approved margin trading in January 2004 and it was introduced in February 2004 in India. If you have a margin account with kotakstreet.com and your margin account balance is Rs10,000, then you can buy shares up to Rs40,000. Effectively kotakstreet.com provides you with a loan of Rs30,000 to complete your transaction. The margin in the account is the portion of the purchase price contributed by the investor; the reminder is borrowed from the broker.

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PERCENTAGE MARGIN

Suppose that the investor initially pays Rs6,000 toward the purchase of Rs10,000 worth of stock (100 shares of Rs100 each), borrowing the remaining Rs4,000 from the broker. The initial balance sheet looks like this: Assets Liabilities and Owners Equity Value of stock Rs10,000 Loan from broker Rs4,000 Equity 6,000 The initial percentage of margin is Margin = Equity/value of stock = 6000/10,000 = 0.60

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If the stocks price declines to Rs70 per share, the account balance becomes: Assets Liabilities and Owners Equity Value of stock Rs7,000 Loan from broker Rs4,000 Equity 3,000 The percentage of margin is now Margin = Equity/value of stock = 3000/7,000 = 0.43 or 43%

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MAINTENANCE MARGIN

Suppose the maintenance margin is 30%. How far could the stock price fall before the investor would get a margin call?
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Let P be the price of the stock. The value of the investors 100 shares is then 100P, and the equity in his or her account is 100P-Rs4,000. Thus we can say (100P-4000) / 100P = 0.3 Or P = Rs57.14 If the price of the stock were to fall below Rs57.14 per share, the investor would get a margin call.

SHORT SELLING
Short selling is generally defined as the practice of selling borrowed securities. Suppose, A feels current market price of a share is Rs.50 and it will reduce Rs.25. He takes loan of a share. Sell Rs.50 Buy Rs.25 and return the share Profit Rs.25 Maximum profit is 50 if price is zero, but, maximum loss is unlimited. Dividend: If dividend is Rs.5, profit Rs.25 5 = 20. Then dividend is to be paid by the short seller to the lender of the share.

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USES OF SHORT SELLING:

Investors short sell for one of two reasons: 1. To seek speculative profit when the price of a security is expected to drop. 2. To protect a profit and defer taxes by Hedging their position.

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All shorts margin.

are

executed

on

SHORTING OR MARGIN:
The

investor has to deposit only margin money. Return on Invested Capital from Short Sale

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= (Proceeds from Sales Purchase Cost of Share Dividend)/Equity Deposit

Suppose

margin is 60% ( initial margin), Current market price of a share is Rs.100, and it is expected to reduce to Rs80. Dividend is Rs.5 Return = (100 80 5)/60 = 15/60 = 25%

SPECULATING WITH SHORT SALE:

Short Sale Initiated: 300 Equity Share @ Rs50 Rs15000 Short Sale Covered: 300 x Rs30 9000 Profit = Dividend @ Rs.5 1500 N/Profit 4500 Equity Deposit @ 50% 7500 Return = (4500/7500) x 100 = 60%

= = 6000 = = =
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MARGIN CALLS ON SHORT POSITIONS

Suppose

that you are bearish on ACC stock and that its current market price is Rs100 per share. You tell your broker to sell short 1 share. The broker borrows 1 share either from another customers account or from another broker. Suppose the broker has a 50% margin requirement on short sales. This means that you must have either cash or security in your account worth Rs50 that can serve as margin on the short sale.

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Like investors who purchase stock on margin, a short-seller must be concerned about margin call. If the stock price rises, the margin in the account will fall; if margin falls to the maintenance level, the short-seller will receive a margin call.

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Suppose that the broker has a maintenance margin of 30% on short sales. This means that the equity in your account must be at least 30% of the value of your short position at all times. How far can the price of ACC go up before you get a margin call?

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Suppose price has increased to P (where P>100). The loss on short sales is P 100. Then the margin money has reduced to 50 (P 100). This reduced margin money is 30% of P. Thus, 50 (P -100) = .3 P Or 150 P = .3P Or 1.3 P = 150 Or P 115.38.

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 If

ACC stock should rise above Rs115.38, you would get a margin call, and you will either have to put up additional cash or cover your short position.

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STOP-BUY ORDER
You have sold ACC on short for Rs100. If the share price falls, you will profit from short sale. On the other hand, if the share price rises, lets say Rs130, you will lose Rs30 per share. But suppose that when you initiate the short sale, you also enter a stop-buy order at Rs120. The stop-buy order will be executed if the share price surpasses Rs120, thereby limiting your losses to Rs20 per share. The stop-buy order thus provides protection to the short-seller if the share price moves up.

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SHORT SALES TO PROTECT A PROFIT AND DEFER TAXES BY HEDGING THEIR POSITION:

01.01.2005 Bought 100 Shares of X Company @ Rs.20 Rs.2000 Now Price Rs.50 Rs.5000 Net Profit Rs.3000

Cost
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Value

To protect Net Profit, he will now short sales of 100 shares @ Rs.50. He has two positions one short and one long of equity shares. Note that although this short sales is executed with borrowed securities, it is not necessary to deposit margin money, because his current holding of the stock serves this purpose.

SHORT SALES TO PROTECT A PROFIT AND DEFER TAXES BY HEDGING THEIR POSITION:

Price Rs.80 Rs.30 Value of the Stock 3000 Original Cost 2000

Price
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8000
2000 ___________

____________ Profit 1000 Less Loss on short sales (Add profit on Short Sales) Short Sales Initiated 5000 Short Sales Covered 8000
________

6000

5000 3000 ________ (-)3000

+2000

________
_______

SHORT-SALES MAY BE
REINTRODUCED
Why SEBI is planning to reintroduce Short-sales? When it was banned? How does short- sale help the market?

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Indian

Security Market A profile

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GROWTH AND DEVELOPMENT OF STOCK MARKET (BSE)

INDIAN

AVERAGE DAILY TURNOVER

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Average Daily Vol. of Turnover(Rs. cr)

4500 4000 3500 3000 2500 2000 1500 1000 500 0 95 96 97 98 99 00 01 02 03 04 Year

NO. OF COS LISTED

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6000
No. of Listed Companies

5900 5800 5700 5600 5500 5400 5300 98 99 00 01 Year 02 03 04

MARKET CAPITALIZATION
1400000
Market Capitalization (Rs cr)

1200000 1000000 800000 600000 400000 200000 0 95 96 97 98 99 00 01 02 03 04 Year

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INTERNATIONAL SCENARIO AT END DECEMBER 2001

(SOURCE: S&P EMERGING STOCK MARKET FACT BOOK, 2002)
Particulars USA UK Japan Germany Singapor e Hong kong China India

No. of listed Cos.

6,355

1,923

2,471

988

386

857

1,160

5,795

Market capitalisation ($ Bn.)

13,810

2,217

2,252

1,072

117

506

524

110

Turnover ($ Mn.)

29,041

1,872

1,826

1,420

63

196

449

249

Turnover ratio (%)

201.3

78.4

67.9

124.7

46.9

34.8

81.3

191.4

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MARKET CAPITALIZATION AND TURNOVER OF MAJOR MARKETS (US $ MILLION)

(SOURCE: S&P EMERGING STOCK MARKET FACT BOOK, 2002)
Country/Region Developed Markets Australia Japan UK USA All Emerging Markets China India Indonesia Korea Malaysia Philippines Taiwan MC 1990 8,795,239 108,879 2,917,679 848,866 3,059,434 604,420 38,567 8,081 110,594 48,611 5,927 1,00,710 9,399,659 32.55 0.41 MC 2000 29,614,264 372,794 3,157,222 2,576,992 15,104,037 2,608,486 580,991 148,064 26,834 148,649 116,935 51,554 247,602 32,222,750 46.87 0.46 www.pptmart.com MC 2001 25,246,554 374,269 2,251,814 2,217,324 13,810,429 2,572,064 523,952 110,396 23,006 220,046 120,007 41,523 292,621 27,818,618 49.64 0.40 TO 1990 4,616,473 40,113 1,602,388 278,740 1,751,252 898,233 21,918 3,992 75,949 10,871 1,216 715,005 5,514,706 31.76 0.40 TO 2000 43,912,999 226,325 2,693,856 1,835,278 31,862,485 3,956,869 721,538 509,812 14,311 1,067,669 58,500 8,196 983,491 47,869,867 66.56 1.06 TO 2001 39,676,018 240,667 1,826,230 1,871,894 29,040739 2,400,844 448,928 249,298 9,667 703,960 20,772 3,148 544,808 42,076,862 69.02 0.59

World Total US as % of World India as % of World

SAVINGS OF HOUSEHOLD SECTOR IN FINANCIAL ASSETS

According to RBI data, household sector accounted for 89% of gross domestic savings during 2000-01, 53% of their savings were in financial assets. They invested 44% of financial savings in deposits 34% in insurance/PFs 12 % on small savings

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SAVINGS OF HOUSEHOLD SECTOR IN FINANCIAL ASSETS

(SOURCE:RBI)
Financial Assets Currency Fixed income securities Deposits Insurance/PF Small savings Securities Market MFs Govt. Securities Other Securities Total 1990-91 10.6 74.9 33.3 28.4 13.2 14.4 9.1 0.2 5.1 100 1992-93 8.2 74.6 42.5 27.2 4.9 17.2 8.6 0 8.6 100 1994-95 10.9 77.0 45.5 22.5 9.0 12.1 3.8 0.1 8.2 100 1996-97 8.6 84.5 48.1 29.4 7.0 6.9 2.7 0.4 3.8 100 1998-99 10.4 85.3 39.2 33.3 12.8 4.2 1.9 0.6 1.7 100 2000-01 6.4 89.4 44.3 33.5 11.6 4.3 1.3 1.6 1.4 100

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STOCK MARKET INDEX

All India All Industries Share Price Index combined and published by the Economic Times on daily basis. S&P CNX Nifty combined and published by NSE India on daily basis. BSE Sensex combined and published by BSE on daily basis.

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COMBINED MARKET INDEX AND RETURN OF ECONOMIC TIMES

AND

NIFTY FROM MAY 1961 TO JUNE 2005

.2

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Market Return

.1 .0 -.1

2500 2000 1500 1000 500 0

-.2

Market Index 65 68 72 76 80 84 89 92 94 98 02

ECONOMIC TIMES DAILY PRICES AND RETURNS FROM MAY 1961 TO JUNE 1990
.08

Economic Times Return

.04
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.00 -.04 -.08

600 500 400 300 200 100 0

Economic Times Price

61

65

68

72

76

80

84

89

NIFTY PRICES AND RETURNS FROM JULY 1990 TO JUNE 2005

.2 .1 .0 -.1 2500 2000 1500 1000 500 0 1992 1994 1996 1998 2000 2002 2004 Nifty Price -.2
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Nifty Return

CONDITIONAL STANDARD DEVIATION OF THE COMBINED INDICES OF THE ECONOMIC TIMES AND S&P CNX NIFTY (MAY 1961 TO JUNE 2005) ESTIMATED ON THE CONDITIONAL VARIANCE EQUATION OF TGARCH (1,1)

.08
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.07 .06 .05 .04 .03 .02 .01 .00 65 70 75 80 85 90 92 97 02 Conditional standard deviation