Continuous compounding

In case of continuous compounding, the interest is compounded continuously. This means that the time periods for compounding are so small that they literally equal zero. The future value of the principal with continuous compounding is given as follows: FV = P*e^(rt) In our example, the future value using continuous compounding will be: FV = $100*exp(5%*3) = 116.1834

In practice, no one compounds interest continuously but it is used extensively for pricing options, forwards and other derivatives.

What is the difference between BSE and NSE?

Answer
BSE is an acronym for BOMBAY STOCK EXCHANGE NSE is an acronym for NATIONAL STOCK EXCHANGE

Difference between NSE and BSE

NSE Stands for National Stock Exchange. It has more than 2000 stocks from different sectors listed with it. It is fully automated electronic order processing exchange. Nifty is major index of NSE and it comprise of 50 scripts from different sectors. NSE official site: http://www.nseindia.com BSE Stand for Bombay Stock Exchange. It is India's Oldest Stock Exchange with listing of over 4000 scripts with it. This not fully automated yet but progress towards full automation is underway. SENSEX is major index of BSE and it comprise of 30 scripts from different sectors. BSE official Site: http://www.bseindia.com What is Sensex? What is Nifty ? Difference between these two Answer:SENSEX - SENSITIVITY INDEX : NIFTY - NATIONAL FIFTY An abbreviation of the Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively-traded stocks on the BSE. Initially compiled in 1986, the Sensex is the oldest stock index in India. The Sensex is an "index". What is an index? An index is basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of

the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Just in case you are confused, the BSE, is the Bombay Stock Exchange and the NSE is the National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as popular as the BSE and the NSE. Most of the stock trading in the country is done though the BSE & the NSE. Besides Sensex and the Nifty there are many other indexes. There is an index that gives you an idea about whether the mid-cap stocks go up and down. This is called the "BSE Mid-cap Index". There are many other types of indexes. Indexes are indicators of the market which gives you a General idea about whether most of the stocks have gone up Or down. There are two types of INDEXES: 1) SENSEX: SENSITIVITY INDEX Sensex is nothing but index of BSE. It has got 30 listed companies. On the other hand, 2) NIFTY: NATIONAL FIFTY and it is nothing but the index of NSE. It has got 50 listed companies

DIFFERENCES BETWEEN NIFTY AND SENSEX:

nifty is an indicator of the performance of the companies listed in national stock exchange situated in Delhi. its an index or a benchmark of the financial performance of the companies. Sensex is an indicator of the financial performance of those companies which r listed in Bombay stock exchange situated in Bombay. Nifty constitutes of 50 companies whereas Sensex constitutes of 30 companies. nifty is a joint holding of nse and iisl when nifty n Sensex goes down it signifies that d majority of the companies' stock prices have fallen down and vice -versa nifty accounts for 70% of total market capitalization

WHO CAN BE LISTED IN BSE AND NSE:

In order to be admitted as a trading member, the individual trading member/at least two partners of the applicant firm/at least two directors of the applicant corporate must be graduates and must possess at least two years' experience in securities markets. The applicant for trading membership/any of its partners/shareholders/directors must not have been declared defaulters on any stock exchange, must not be debarred by SEBI for being associated with capital market as intermediaries and must not be engaged in any fund-based activity. The trades executed on the Exchange may be cleared and settled by a clearing member. There is a special category of members, called professional clearing members (PCMs), who do not trade but only clear trades executed by others. The initial joining fee for a member at BSE is Rs. 90 Lakhs while that for an NSE member is between 100 to 300 Lakh depending on the kind of membership one chooses. In addition to annual fees, NSE members are required to pay transaction charges on trades undertaken by them. They pay transaction charge at the rate of Rs. 3.5 for every Rs. 1 lakh of turnover in the CM segment. The transaction charges payable to the exchange by the trading member for the trades executed by him on the F&O segment are fixed at the rate of Rs. 2 per lakh of turnover (0.002%) subject to a minimum of Rs. 1,00,000 per year. At BSE, these fees differ according to the various types of members.

The S&P CNX Nifty

It is a float-adjusted market capitalization weighted index derived from economic research. It was designed not only as a barometer of market movement but also to be a foundation of the new world of financial products based on the index like index futures, index options and index funds. A trillion calculations were expended to evolve the rules inside the S&P CNX Nifty index. The results of this work are remarkably simple: (a) the correct size to use is 50, (b) stocks considered for the S&P CNX Nifty must be liquid by the impact cost criterion, (c) the largest 50 stocks that meet the criterion go into the index. The research that led up to S&P CNX Nifty is well-respected internationally as a pioneering effort in better understanding how to make a stock market index. The S&P CNX Nifty covers 21 sectors of the Indian economy and offers investment managers exposure to the Indian market in one efficient portfolio. It is used for a variety of purposes, such as benchmarking fund portfolios, index based derivatives and index funds. The Nifty is uniquely equipped as an index for the index derivatives market owing to its (a) low market impact cost and (b) high hedging effectiveness. The good diversification of Nifty generates low initial margin requirement.