Outsourcing of Financial Research

Over the years one of the prime concern of fund managers and other investors is the valuable time spent by the analysts on analysis. Studies have shown that a considerable amount of time was spent by the analysts in activities such as sourcing of financial information, preparing reports, populating the data required for financial research, tracking information related to mergers and acquisitions etc. Given the current mayhem at the stock markets and the need for detailed analysis of the situation has motivated the visionaries of many successful organizations to outsource a considerable amount of work to KPOs which specialize in financial research and analysis to improve their turn around time.



Services Provided by KPOs

The services of such KPOs include financial information aggregation investment research analysis, market intelligence, reporting and publishing support. The services of KPOs cover all approaches of investment decisions which encompass making an investment choice based on funds, equities, sectors, countries etc. Their clients include private equity and hedge funds, large investment banks, asset management companies, corporate finance groups, fund administrators and other financial institutions. This is achieved with a finesse as KPOs design, create and deliver customized solutions to Investment banks, Asset management companies, Private Equity groups, corporate finance groups and Large Institutional investors. One the key areas in which KPOs operate are the writing of annual reports which ease the process of mining the data present in the annual reports, and sourcing the information required for financial research. This is useful for studying and predicting the future of an organization but also giving key insights on the working of the whole sector.

Such KPOs not only help their clients create value by providing customized services which are backed by domain expertise and high-end analytical skills but they also work closely with their clients to deliver services that adapt to their evolving needs.

Financial Valuation Models

One of the critical components of financial research, due to its use in almost every aspect on financial analysis, is estimation of the market value of the financial asset/liability. It is commonly known as financial valuation and the efficiency of using these models determines the quality of research done by the financial researchers.


Which models are widely used ?

The most widely used models are the relative value models, absolute value models and option pricing models. The relative value model is widely used by the hedge fund managers to quantify the attractiveness measured of one financial instrument relative to another. Further, some Hedge funds have mastered strategies that take advantage of the difference in pricing between two related and correlated securities. Sector Researchers have taken relative pricing further to compare various sectors such as telecommunication, mining, etc.

Black-Scholes Model:

The modern pricing are some of the most mathematically complex applied areas of finance and mathematics. Financial analysts have reached the point where they are able to calculate, with alarming accuracy, the value of a stock option. The most widely used models for pricing are the Capital Asset Pricing Model, the Fama-French three-factor model and Black-Scholes pricing model. The Black-Scholes model is so popular that most of the models and techniques employed by today's analysts are rooted in this model. As the value of an option varies only with the stock price and time to expiry it supports the possibility of a hedged position consisting of a long position in the stock and a short position in calls of the same stock whose value will not depend on the price of the stock.

Custom Databases For Financial Analysis

Financial Analysis and Research relies heavily on the data mined from the various online and offline sources. Mining this offline data is many a times a herculean task as it involves not only parsing the annual reports but other records that are publicly available at various government institutions. Once this data is obtained, it needs to stored in a structured format. This article gives a nice overview on the importance of sourcing the data for such custom databases.



Custom Databases:

Many financial researchers require the databases stored in the format they have tried and tested over the years, but due to the lack of time have decided to outsource this activity to KPOs. Designing the schema to ensure that the requirements are met is a cumbersome activity. Further, this task becomes non trivial as the Atomicity, Consistency, Integrity and Durability of the database needs to be ensured. Many database engines ensure the above criteria are met however, the processes feeding this data must also ensure that none of the above criteria are violated. This is extremely critical when operating with the offline data which is entered manually.

Presenting the Data:

Storing the data in a structured format is just the tip of the iceberg, as the UI that allows users to access the data needs to be designed. KPOs that operate in the area of financial research and analysis have lately mastered the art of not only mining the data and storing them in structured and custom databases but also in providing some neat user interfaces to easily access this data. This activity has been many a times won accolades from banks and fund managers for being a time saver.