... (Bring money and dice.)
Decision-making among lotteries
“EMV-ers” vs. real people
The Fundamental Theorem of Decision Theory
(You should maximize expected utility, with respect
to some probability distribution)
Real probabilities vs. “probabilities” in the theorem
FIN 508: Financial Management
... OBJECTIVES: After completing this course the students should be able to
1. Find the present value, or future value, of various cash flows.
2. Calculate the intrinsic value of a stock or a bond.
3. Apply the concept of capital budgeting in the evaluation of projects.
4. Use the concept of risk and re ...
... - Monetary – interest rates/money supply – data dependent – fiscal stimulus – higher rates
– Fed Balance Sheet
- Weighted combination
Corruption in the financial markets 29012009
... Financial analysts: Should give a
professional advise, but often influenced by
employer. M&A corruption & blackmail +
Auditors: Certify accounts but give
consulting; greatly improved since 2003.
Rating agencies:" rate” companies + “sell”
ratings ⇒ encourage off balance,
Views of Risk
... • Evaluate investments in terms of risk & return relative to the market
as a whole
• The riskier a stock, the greater profit potential
• Thus RISK IS OPPORTUNITY
Introduction to Finance - Montclair State University
... some sectors over others. Such was the case with the conversion of the
U.S. economy from producing civilian to military goods during the Second
World War, and in the now abandoned use of Regulation Q to favor
housing construction in the U.S.
Apart from the question of an orderly functioning of a sec ...
Efficient Market Theory and the Crisis
... financial firms or by the regulators who did not see the risks that subprime mortgagebacked securities posed to the financial stability of the economy. Regulators wrongly
believed that financial firms were offsetting their credit risks, while the banks and credit
rating agencies were fooled by fault ...
ART can mitigate economic fallout
... place benefit accordingly. In this context, capacity aggregation is essentially about taking big
deductibles on risks where risk management is well controlled and financing this by using
multi-year solutions with real risk transfer, which is given on predetermined reinstatement
Understanding the Bond Market
... Bonds are a well-established asset class holding trillions of dollars globally. Even though they pass for
“boring” in the general public and with some novice investors, debt instruments are anything but.
When you understand them in more depth, you will gain new insights into many news stories from
... • His two insights
– Equities were undervalued at the end of 70s
and the beginning of 80s
– There is a gap between equity market and
risk free asset.
... This paper explores the time series implications of introducing credit
constraints into a production based asset pricing model. Simulations are
performed choosing parameter values which generate reasonable values for
aggregate fluctuations. These results show that mean reversion in simulated
The 2007/2008 financial crisis came with a strong fall in stock prices
... macroeconomic tranquility (later called the ‘Great Moderation’), which was
characterised by significantly lower volatility of GDP growth.
As the authors argue, the rising confidence in this calm economic environment might
explain a large part of the observed boom in stock prices. And the realisation ...
FREE Sample Here - We can offer most test bank and
... I do little trading, so investment games are inconsistent with
my investment philosophy and strategy. Although I do not
discourage students from participating in a game, I also do
nothing to encourage their use. I, however, have included two
investment assignments at the end of the first chapter. Th ...
... Presentation: Globalaw Americas Regional meeting
Hotel Hyatt Regency Curacao
Financial Mathematics and Applied Probability Seminars 2001-2002
... also captured by the recursive utility formulation. We ask: (1) how utility
specifications may affect the equilibrium behaviour of security prices; and,
conversely, (2) how equilibrium security prices can convey information about
representative agent's preferences. For example, can we distinguish be ...
Financial economics is the branch of economics characterized by a ""concentration on monetary activities"", in which ""money of one type or another is likely to appear on both sides of a trade"". Its concern is thus the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. It has two main areas of focus: asset pricing (or ""investment theory"") and corporate finance; the first being the perspective of providers of capital and the second of users of capital.The subject is concerned with ""the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment"". It therefore centers on decision making under uncertainty in the context of the financial markets, and the resultant economic and financial models and principles, and is concerned with deriving testable or policy implications from acceptable assumptions. It is built on the foundations of microeconomics and decision theory.Financial econometrics is the branch of financial economics that uses econometric techniques to parameterise these relationships. Mathematical finance is related in that it will derive and extend the mathematical or numerical models suggested by financial economics. Note though that the emphasis there is mathematical consistency, as opposed to compatibility with economic theory.Financial economics is usually taught at the postgraduate level; see Master of Financial Economics. Recently, specialist undergraduate degrees are offered in the discipline.Note that this article provides an overview and survey of the field: for derivations and more technical discussion, see the specific articles linked.