An interval portfolio selection problem based on regret function
An
interval portfolio selection problem based on regret function |
Silvio
Giove, Stefania Funari, Carla
Nardelli. European Journal of Operational
Research. Amsterdam: Apr 1, 2006.Vol.170, Iss. 1; pg. 253 |
» |
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Subjects: |
Portfolio
management, Mathematical programming, Decision
making, Stock prices, Uncertainty, Operations
research, Studies |
Classification Codes |
3400 Investment
analysis & personal finance, 2600 Management science/operations
research, 9130 Experimental/theoretical |
Author(s): |
Silvio
Giove, Stefania Funari, Carla
Nardelli |
Document types: |
Feature |
Publication title: |
European
Journal of Operational Research. Amsterdam: Apr 1, 2006. Vol. 170, Iss. 1; pg. 253 |
Source type: |
Periodical |
ISSN/ISBN: |
03772217 |
ProQuest document ID: |
908068851 |
Document URL: |
http://proquest.umi.com/pqdweb?did=908068851&sid=1&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
Different approaches,
besides the traditional Markowitz's model, have been proposed in the literature
to analyze portfolio selection problems. Among them we can cite the
possibilistic portfolio models, which treat the expected return rates
of the securities as fuzzy or possibilistic variables, instead of random
variables. Such models, which are based on possibilistic mathematical
programming, describe the uncertainty of the real world as ambiguity
and vagueness, rather than stochasticity. Actually, another way to treat
the uncertainty in decision making problems consists of assuming that
the data are not well defined, but are able to vary in given intervals.
Interval analysis is thus appropriate to handle the imprecise input
data. In this paper we consider a portfolio selection problem in which
the prices of the securities are treated as interval variables. In order
to deal with such an interval portfolio problem, we propose the adoption
of a minimax regret approach based on a regret function. [PUBLICATION
ABSTRACT] |
Portfolio
selection using hierarchical Bayesian analysis and MCMC methods |
Alex
Greyserman, Douglas H Jones, William
E Strawderman. Journal of Banking &
Finance. Amsterdam: Feb 2006.Vol.30, Iss. 2; pg. 669 |
» |
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documents |
Subjects: |
Studies, Portfolio
investments, Stochastic models, Forecasting
techniques, Hierarchies, Bayesian
analysis |
Classification Codes |
9130 Experimental/theoretical, 3400 Investment
analysis & personal finance |
Author(s): |
Alex
Greyserman, Douglas H Jones, William
E Strawderman |
Document types: |
Feature |
Publication title: |
Journal
of Banking & Finance. Amsterdam: Feb 2006. Vol. 30, Iss. 2; pg. 669 |
Source type: |
Periodical |
ISSN/ISBN: |
03784266 |
ProQuest document ID: |
991577391 |
Document URL: |
http://proquest.umi.com/pqdweb?did=991577391&sid=1&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
This paper contributes
to portfolio selection methodology using a Bayesian forecast of the
distribution of returns by stochastic approximation. New hierarchical
priors on the mean vector and covariance matrix of returns are derived
and implemented. Comparison's between this approach and other Bayesian
methods are studied with simulations on 25 years of historical data
on global stock indices. It is demonstrated that a fully hierarchical
Bayes procedure produces promising results warranting more study. We
carried out a numerical optimization procedure to maximize expected
utility using the MCMC (Monte Carlo Markov Chain) samples from the posterior
predictive distribution. This model resulted in an extra 1.5 percentage
points per year in additional portfolio performance (on top of the Hierarchical
Bayes model to estimate mu and sigma and use the Markowitz model), which
is quite a significant empirical result. This approach applies to a
large class of utility functions and models for market returns. [PUBLICATION
ABSTRACT] |
The
Analytics of Uncertainty and Information-An Expository Survey |
Hirshleifer, J., Riley,
John G.. Journal of Economic Literature. Nashville: Dec
1979.Vol.17, Iss. 4; pg. 1375 |
» |
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documents |
Subjects: |
Utility, Uncertainty, Risk, Research, Market
equilibrium , Inventions, Insurance, Information, Functions, Economic
theory, Decision making |
Classification Codes |
8200 Insurance
industry, 5400 Research & development, 1100 Economics |
Author(s): |
Hirshleifer, J., Riley, John G. |
Publication title: |
Journal
of Economic Literature. Nashville: Dec 1979. Vol. 17, Iss. 4; pg. 1375 |
Source type: |
Periodical |
ISSN/ISBN: |
00220515 |
ProQuest document ID: |
1162062 |
Document URL: |
http://proquest.umi.com/pqdweb?did=1162062&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
Despite the long-standing
recognition by economic thinkers that human endeavors are constrained
by man's limited and uncertain knowledge of the world, until recently
there was no rigorous foundation for the analysis of individual decision
making and market equilibrium under uncertainty.The central underlying
ideas related to information and uncertainty are presented in a nontechnical
fashion. The theoretical developments that have brought about this intellectual
revolution have 2 main foundations: 1. the theory of preference for
uncertain contingencies and in particular the ''expected-utility theorem''
of John von Neumann and Oskar Morgenstern, and 2. the formulation of
the ultimate goods or objects of choice in an uncertain universe as
contingent consumption claims: entitlements to particular commodities
or commodity baskets valid only under specified ''states of the world.''
This modern analytical literature on uncertainty and information divides
into 2 rather distinct branches. The first branch deals with market
uncertainty, and the second deals with technological uncertainty or
event uncertainty. This examination is limited to the relatively more
tractable topic of event uncertainty. |
Competition,
cooperation, and conflict in economics and biology |
Hirshleifer, J.. The
American Economic Review. Nashville: May 1978.Vol.68, Iss. 2; pg. 238 |
» |
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documents |
Subjects: |
Social
sciences, Political theory, Equilibrium , Economy, Economic
theory, Cooperation, Competition, Behavior |
Classification Codes |
1100 Economics |
Author(s): |
Hirshleifer, J. |
Publication title: |
The
American Economic Review. Nashville: May 1978. Vol. 68, Iss. 2; pg. 238 |
Source type: |
Periodical |
ISSN/ISBN: |
00028282 |
ProQuest document ID: |
936051 |
Document URL: |
http://proquest.umi.com/pqdweb?did=936051&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
Sociobiology encompasses
the various social sciences, including economics, devoted to the study
of man. The subject matter of conventional social science is in essence
the field of political economy, and biology is the natural economy.
The natural economy and the political economy are subdivisions of the
universal general economy. Political economy institutions such as law
and government deter the internal fighting that would be disfunctional
for society as a whole. But the institutions of the political economy
do not displace the underlying realities of the natural economy. Fundamental
concepts such as scarcity, equilibrium, competition, and specialization
play similar roles in economic and biological systems. The Coase Theorem
guarantees Pareto-efficient solutions under ideal political economy
institutions. Cooperation takes the form of exchange for mutual gain
in the political economy. |
THE
THEORY OF SPECULATION UNDER ALTERNATIVE REGIMES OF MARKETS |
HIRSHLEIFER, J.. The
Journal of Finance. Cambridge: SEPT. 1977.Vol.32, Iss. 4; pg. 975 |
» |
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documents |
Subjects: |
Speculation, Risk, Markets, Factors |
Classification Codes |
3400 Investment
analysis |
Author(s): |
HIRSHLEIFER, J. |
Publication title: |
The
Journal of Finance. Cambridge: SEPT. 1977. Vol. 32, Iss. 4; pg. 975 |
Source type: |
Periodical |
ISSN/ISBN: |
00221082 |
ProQuest document ID: |
1164968 |
Document URL: |
http://proquest.umi.com/pqdweb?did=1164968&sid=5&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
IT IS THE INTERACTION
BETWEEN PRICE RISK AND QUANTITY RISK THAT GOVERNS THE OVERALL HAZARD
ACCEPTED OR AVOIDED BY INDIVIDUALS. SPECULATION AND HEDGING CONSIST
OF TRADING IN THE PRIOR AND POSTERIOR MARKETS IN SUCH A WAY AS TO ACHIEVE
COMPOUND CONSUMPTIVE GAMBLES 'D' THAT DIFFER FROM THE SIMPLE CONSUMPTIVE
GAMBLES 'C' THAT WOULD HAVE BEEN ADOPTED IN A NON-INFORMATIVE SITUATION.
AMONG THE FACTORS POSSIBLY INVOLVED IN THE SPECULATIVE DECISION ARE
- 1. THE INDIVIDUAL'S BELIEF ABOUT THE EMERGENCE AND CONTENT OF NEW
INFORMATION, 2. HIS UTILITY FUNCTION, 3. THE SCALE AND COMPOSITION OF
HIS ENDOWNMENT, AND 4. THE EXTENT OF THE MARKETS AVAILABLE. SPECULATIVE
TRADING IS UNDERTAKEN ONLY BY INDIVIDUALS WHOSE OPINIONS, AS TO THE
LIKELIHOOD OF FUTURE STATES OF THE WORLD, DIVERGE FROM REPRESENTATIVE
BELIEFS IN THE MARKET. TABLES. EQUATIONS. REFERENCES. |
Risk-Premium
Curve vs. Capital Market Line: Differences Explained |
Long,
Susan W.. Financial
Management. Tampa: Spring 1978.Vol.7, Iss. 1; pg. 60 |
» |
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documents |
Subjects: |
Security
portfolios, Risk premiums, Risk, Return
on investment, Regression analysis, Models, Capital
markets |
Classification Codes |
3400 Investment
analysis, 3100 Debt Management |
Author(s): |
Long,
Susan W. |
Publication title: |
Financial
Management. Tampa: Spring 1978. Vol. 7, Iss. 1; pg. 60 |
Source type: |
Periodical |
ISSN/ISBN: |
00463892 |
ProQuest document ID: |
1089032 |
Document URL: |
http://proquest.umi.com/pqdweb?did=1089032&sid=7&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
Higher returns are
required as the risk of an investment increases. This positive relationship
is called the capital market line (CML). The minimal return for riskless
assets is called the risk-free rate. By regressing return on risk and
risk on return and averaging the results, W. F. Sharpe demonstrated that for the period 1954-1963,
"investors required and received 3.8% return on riskless assets
and an additional .58% return per annum for each additional 1% of risk.
By regressing risk on return, Soldofsky and Miller (S-M) showed there
are no risk-free assets. They found that assets with no return had risk
levels of 5.6% standard deviation of annual return. To determine what
caused the conflicting results, 400 common stocks were randomly selected
from the 1975 COMPUSTAT data tapes. Portfolio inefficiency, regressing
risk on return, and using geometric measures probably contributed to
S-M's positive risk results when Sharpe found it to be negative. |
The
Regulated Financial Firm |
Meyer,
Robert A., Jr.. The Quarterly review of
economics and business.. Urbana: Winter 1980.Vol.20, Iss. 4; pg. 44 |
» |
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Like This - Find similar
documents |
Subjects: |
Uncertainty, Statistical
analysis, Risk aversion, Reserve
requirements, Regulation, Interest
rates, Financial institutions, Ceilings |
Classification Codes |
8100 Financial
services industry, 4300 Law |
Author(s): |
Meyer,
Robert A., Jr. |
Publication title: |
The
Quarterly review of economics and business.. Urbana: Winter 1980. Vol. 20, Iss. 4; pg. 44 |
Source type: |
Periodical |
ISSN/ISBN: |
00335797 |
ProQuest document ID: |
1377411 |
Document URL: |
http://proquest.umi.com/pqdweb?did=1377411&sid=7&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
A model is developed
of a regulated financial firm under uncertainty which explicitly incorporates
risk aversion. The model is based on the valuation relationship for
uncertain income streams developed by W. F. Sharpe and John Lintner which has provided the popular
capital asset pricing model widely used in finance. Once a basic solution
is characterized, it is used to explore the implicit cost of reserve
requirements and, in particular, the effect of differential regulatory
requirements on a commercial bank's competitive position. Additional
analyses focus on selected regulations such as interest rate ceilings,
portfolio restrictions, and the question of deposit insurance versus
equity investment. |
Divergence
of Opinion and Risk |
Bart,
John, Masse, Isidore J.. Journal
of Financial and Quantitative Analysis. Seattle: Mar 1981.Vol.16, Iss. 1; pg. 23, 12 pgs |
» |
More
Like This - Find similar
documents |
Subjects: |
Uncertainty, Stocks, Stock
prices, Securities analysis, Securities, Risk, Return
on investment, Opinions, Expectations, Differences, Appreciation |
Classification Codes |
3400 Investment
analysis |
Author(s): |
Bart,
John, Masse, Isidore J. |
Publication title: |
Journal
of Financial and Quantitative Analysis. Seattle: Mar 1981. Vol. 16, Iss. 1; pg. 23, 12 pgs |
Source type: |
Periodical |
ISSN/ISBN: |
00221090 |
ProQuest document ID: |
1166313 |
Document URL: |
http://proquest.umi.com/pqdweb?did=1166313&sid=11&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
Edward Miller, expanding
on the work of Williams, Smith, and Lintner, has proposed a direct relationship
between a stock's ''risk'' and its ''divergence of opinion.'' Under
conditions of uncertainty, potential investors in a stock reach different
assessments of expected return. This difference in expectations is characterized
as the stock's divergence of opinion. Miller argues that at a point
in time a stock's price does not mirror the expectations of all potential
investors, but rather the expectations of only the most optimistic minority
who are trading the issue. As long as this minority can absorb the entire
supply of stock, an increase (decrease) in divergence of opinion-leaving
the average expectation unchanged-will raise (lower) the market clearing
|
The
legacy of modern portfolio theory |
Frank
J Fabozzi, Francis Gupta, Harry
M Markowitz. Journal
of Investing. New York: Fall 2002.Vol.11, Iss. 3; pg. 7 |
» |
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documents |
Subjects: |
Portfolio management, Theory, History, Studies, Portfolio performance, Rates
of return |
Classification Codes |
9190 United
States, 9130 Experimental/theoretical, 3400 Investment
analysis & personal finance |
Locations: |
United
States, US |
Author(s): |
Frank
J Fabozzi , Francis Gupta, Harry
M Markowitz |
Document
types: |
Feature |
Publication title: |
Journal
of Investing. New York: Fall 2002. Vol. 11, Iss. 3; pg. 7 |
Source type: |
Periodical |
ISSN/ISBN: |
10680896 |
ProQuest document ID: |
187618251 |
Document URL: |
http://proquest.umi.com/pqdweb?did=187618251&sid=16&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
Fifty years have
passed since the publication of Harry Markowitz's article on portfolio
selection, setting forth the
ground-breaking concepts that have come to form the foundation of what
is now popularly referred to as Modern Portfolio Theory. This article briefly explains the theory
underlying MPT and uses illustrations to highlight the application of
MPT to the current practice of asset management and portfolio construction. It also surveys most of the relevant
research that has directly or indirectly been either an outcome of MPT
or has contributed to the implementation of MPT. |
The
theory and practice
of corporate
finance: Evidence from the
field |
John
R Graham, Campbell R Harvey. Journal
of Financial Economics. Amsterdam: May/Jun 2001.Vol.60, Iss. 2,3; pg. 187 |
» |
More
Like This - Find similar
documents |
Subjects: |
Studies, Capital
structure, Capital costs, CAPM, Capital
budgeting, Risk assessment |
Classification Codes |
9190 United
States, 9130 Experimental/theoretical, 3100 Capital
& debt management |
Locations: |
United
States, US |
Author(s): |
John
R Graham , Campbell R Harvey |
Document
types: |
Feature |
Publication title: |
Journal
of Financial Economics. Amsterdam: May/Jun 2001. Vol. 60, Iss. 2,3; pg. 187 |
Source type: |
Periodical |
ISSN/ISBN: |
0304405X |
ProQuest document ID: |
77223127 |
Document URL: |
http://proquest.umi.com/pqdweb?did=77223127&sid=18&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
This study surveys
392 CFOs about the cost of capital, capital budgeting, and capital structure.
Large firms rely heavily on present value techniques and the capital
asset pricing model, while small firms are relatively likely to use
the payback criterion. A surprising number of firms use firm risk rather
than project risk in evaluating new investments. This study finds some
support for the pecking-order and trade-off capital structure hypotheses
but little evidence that executives are concerned about asset substitution,
asymmetric information, transaction costs, free cash flows, or personal
taxes. |
Management
versus equity: A principal-agent problem in a continuous-time stochastic
control model |
by Clark, Steven Paul, Ph.D., Clemson University, 2003, 54
pages; AAT 3093204 |
» |
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documents |
Advisor:
|
Maloney,
Michael T., Tamura, Robert |
School: |
Clemson University |
School Location:
|
United States -- South
Carolina |
Index terms(keywords): |
Management, Equity, Principal
agent, Continuous-time, Stochastic
control |
Source: |
DAI-A 64/06, p. 2194, Dec
2003 |
Source type:
|
DISSERTATION |
Subjects: |
Finance, Cash
management, Stock offerings, Stochastic
models, Studies |
Publication Number: |
AAT 3093204 |
Document URL: |
http://proquest.umi.com/pqdweb?did=765982801&sid=18&Fmt=2&clientId=18913&RQT=309&VName=PQD |
ProQuest document ID: |
765982801 |
Abstract (Document Summary) |
In this
dissertation, we formulate a model prescribing optimal policy for cash
disbursements and seasoned equity offerings taking into account the
principle-agent problem inherent in these decisions. Specifically, we
suppose that stockholders have perfect information about the level of
current free cash flows. In order to discipline managers, stockholders
would like to have excess free cash flows disbursed either as cash dividends
or through stock repurchases. Managers resist stockholders in this regard
since they prefer to have excess free cash flows in order to pursue
personal interests and reduce the probability that the company will
experience financial distress in the future. However, as a consequence
of withholding cash disbursements, managers incur disutility due to
the possibility that their control of the firm could be threatened by
the market for corporate control. Due to their inability to fully eliminate
firm-specific risk managers are generally more risk averse than stockholders.
Managers may issue seasoned equity in an attempt to prevent free cash
flow from falling below a given level. However, stockholders do not
like this practice since it transfers a portion of their ownership
rights to new shareholders. We model this situation as a stochastic
impulse control problem, and succeed in finding an analytical solution.
This is the first research that applies the
theory of stochastic impulse
control to the determination of optimal policy for cash disbursement
and seasoned equity offerings. |
TAXES AND THE PRICING
OF OPTIONS |
SCHOLES,
MYRON. The Journal of Finance. Cambridge: MAY
1976.Vol.31, Iss. 2; pg. 319 |
» |
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Subjects: |
Writing, Taxation, Pricing, Options trading |
Classification Codes |
4200 Taxation, 3400 Investment
analysis |
Author(s): |
SCHOLES,
MYRON |
Publication title: |
The
Journal of Finance. Cambridge: MAY 1976. Vol. 31, Iss. 2; pg. 319 |
Source type: |
Periodical |
ISSN/ISBN: |
00221082 |
ProQuest document ID: |
1164818 |
Document URL: |
http://proquest.umi.com/pqdweb?did=1164818&sid=21&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
THE TAX ADVANTAGES
OF WRITING FOR INVESTORS IN HIGH TAX BRACKETS HAVE SEVERAL EFFECTS ON
OPTION PRICING AND THE TRADING OF OPTIONS. EMPIRICAL EVALUATIONS OF THE PRICING AND TRADING IN LISTED OPTIONS WILL HAVE TO INCLUDE THESE TAX EFFECTS IN THE
EVALUATION METHODOLOGY. IT IS LIKELY THAT OPTIONS THAT ARE IN THE MONEY WILL BE SELLING FOR CLOSE
TO INTRINSIC VALUE, AND THEIR TAX BENEFITS WILL BE SHARED BY THE WRITER
AND THE BUYER. WHERE IT WAS POSSIBLE TO REDUCE TAXES AT LITTLE RISK,
SUCH AS IN THE TAX-EXEMPT BOND CASE, THE GOVERNMENT HAD TO IMPOSE RESTRICTIONS
THAT WOULD LIMIT THE ADVANTAGES OF THE TAX-AVOIDANCE PLAN. IT HAS BEEN
SHOWN THAT CORPORATE
LIABILITIES ARE OPTIONS. THE USE OF THE OPTION PRICING MODEL TO PRICE DEBT AND EQUITY CAN NOW BE EXPANDED
TO INCLUDE TAX EFFECTS ON THE PRICING OF RISKY DEBT CLAIMS. REFERENCES. |
Pricing
options on leveraged equity
with default risk and exponentially increasing, finite maturity debt |
Michael
Hanke. Journal of Economic Dynamics
& Control. Amsterdam: Mar 2005.Vol.29, Iss. 3; pg. 389 |
» |
More
Like This - Find similar
documents |
Subjects: |
Studies, Credit
risk, Economic models, Valuation, Stock
prices, Stock options |
Classification Codes |
9130 Experimental/theoretical, 3400 Investment
analysis & personal finance, 1130 Economic theory |
Author(s): |
Michael
Hanke |
Document types: |
Feature |
Publication title: |
Journal
of Economic Dynamics & Control. Amsterdam: Mar 2005. Vol. 29, Iss. 3; pg. 389 |
Source type: |
Periodical |
ISSN/ISBN: |
01651889 |
ProQuest document ID: |
800858421 |
Document URL: |
http://proquest.umi.com/pqdweb?did=800858421&sid=21&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
We extend a modular pricing
framework proposed by Ericsson and Reneby (Appl. Math. Finance 5 (1998)
143; Stock options as barrier contingent claims, Working Paper,
Stockholm School of Economics; The valuation of corporate
liabilities: theory and tests,
Working Paper, Stockholm School of Economics) to derive a valuation
formula for calls on leveraged equity, similar to Toft and Prucyk (J.
Finance LII (1997) 1151). In contrast to their derivation via partial
differential equations, we choose a more elegant probabilistic approach
using change of numeraire techniques. Considerably extending previous
firm-value-based option pricing models, our framework features exponentially
increasing, finite maturity coupon debt, along with taxes and deviations
from absolute priority. It enables us to study effects of debt maturity
and debt growth on prices of equity options. Numerical results provide new insights into
possible causes for pricing biases of the Black-Scholes formula. [PUBLICATION
ABSTRACT] |
The
instantaneous capital market line |
Lars
Tyge Nielsen, Maria Vassalou. Economic
Theory. Heidelberg: Aug 2006.Vol.28, Iss. 3; pg. 651 |
» |
More
Like This - Find similar
documents |
Subjects: |
Studies, Economic
theory, CAPM, Investment policy |
Classification Codes |
9130 Experimental/theoretical, 1130 Economic
theory, 3400 Investment analysis &
personal finance |
Author(s): |
Lars
Tyge Nielsen, Maria Vassalou |
Document types: |
Feature |
Publication title: |
Economic
Theory. Heidelberg: Aug 2006. Vol. 28, Iss. 3; pg. 651 |
Source type: |
Periodical |
ISSN/ISBN: |
09382259 |
ProQuest document ID: |
875045721 |
Text Word Count |
4974 |
DOI: |
10.1007/s00199-005-0638-1 |
Document URL: |
http://proquest.umi.com/pqdweb?did=875045721&sid=22&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract (Document Summary) |
We show
that if the intercept and slope of the instantaneous capital market
line are deterministic, then investors will not hold any hedge portfolios
in the sense of Merton [9, 11]. They will choose portfolios that plot
on the capital market line, and they will slide up and down the capital
market line over time as their wealth and risk tolerance change. This
result allows us to aggregate over investors and derive a single factor
CAPM where the first and second moments of security returns may change
stochastically over time and markets are potentially incomplete. [PUBLICATION
ABSTRACT] |
Option
Pricing: A
Simplified Approach |
Cox,
John C., Ross, Stephen A., Rubinstein,
Mark. Journal of Financial Economics. Amsterdam: Sep
1979.Vol.7, Iss. 3; pg. 229 |
» |
More
Like This - Find similar
documents |
Subjects: |
Valuation, Stock
prices, Pricing, Options, Models, Mathematical
models, Arbitrage |
Classification Codes |
3400 Investment
analysis, 1100 Economics |
Author(s): |
Cox,
John C., Ross, Stephen A., Rubinstein,
Mark |
Publication title: |
Journal
of Financial Economics. Amsterdam: Sep 1979. Vol. 7, Iss. 3; pg. 229 |
Source type: |
Periodical |
ISSN/ISBN: |
0304405X |
ProQuest document ID: |
1164548 |
Document URL: |
http://proquest.umi.com/pqdweb?did=1164548&sid=23&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
In 1973, Fischer
Black and Myron Scholes presented the first completely satisfactory
equilibrium option pricing model. Unfortunately, the mathematical
tools employed in the Black-Scholes model are quite advanced and have
tended to obscure the underlying economies.The fundamental economic
principles of option pricing by arbitrage methods are particularly
clear in the simple discrete-time model presented. Its development requires
only elementary mathematics, yet it contains as a special limiting case
the Black-Scholes model. The basic model readily lends itself to generalization
in many ways. Moreover, by its very construction, it gives rise to a
simple and efficient numerical procedure for valuing options for which
premature exercise may be optimal. It is clear that whenever stock price
movements conform to a discrete binomial process or to a limiting form
of such a process, options can be priced solely on the basis of arbitrage
considerations. |
The
irrelevance of the MM dividend irrelevance theorem |
Harry
DeAngelo, Linda DeAngelo. Journal
of Financial Economics. Amsterdam: Feb 2006.Vol.79, Iss. 2; pg. 293 |
» |
More
Like This - Find similar
documents |
Subjects: |
Economic
models, Theory, Dividends, Studies, Investment policy |
Classification Codes |
1130 Economic
theory, 3400 Investment analysis &
personal finance, 9130 Experimental/theoretical |
Author(s): |
Harry
DeAngelo, Linda DeAngelo |
Document types: |
Feature |
Publication title: |
Journal
of Financial Economics. Amsterdam: Feb 2006. Vol. 79, Iss. 2; pg. 293 |
Source type: |
Periodical |
ISSN/ISBN: |
0304405X |
ProQuest document ID: |
974198791 |
Document URL: |
http://proquest.umi.com/pqdweb?did=974198791&sid=24&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
Contrary to Miller
and Modigliani [1961. Dividend
policy, growth, and the valuation of shares. Journal of Business 34, 411-433], payout policy
is not irrelevant and investment policy is not the sole determinant of value, even in
frictionless markets. MM ask "Do companies with generous distribution
policies consistently sell at a premium above those with niggardly payouts?"
But MM's analysis does not address this question because the joint effect
of their assumptions is to mandate 100% free cash flow payout in every
period, thereby rendering "niggardly payouts" infeasible and
forcing distributions to a global optimum. Irrelevance obtains, but
in an economically vacuous sense because the firm's opportunity set
is artificially constrained to payout policies that fully distribute
free cash flow. When MM's assumptions are relaxed to allow retention,
payout policy matters in exactly the same sense that investment policy
does. Moreover (i) the standard Fisherian model is empirically refutable,
predicting that firms will make large payouts in present value terms,
(ii) only when payout policy is optimized will the present value of distributions
equal the PV of project cash flows, (iii) the NPV rule for investments
is not sufficient to ensure value maximization, rather an analogous
rule for payout policy is also necessary, and (iv) Black's [1976. The dividend
puzzle. Journal of Portfolio Management 2, 5-8] "dividend puzzle" is a non-puzzle because it is rooted
in the mistaken idea that MM's irrelevance theorem applies to payout/retention
decisions, which it does not. [PUBLICATION ABSTRACT] |
DIVIDEND
POLICY, GROWTH, AND THE VALUATION OF SHARES |
MERTON
H MILLER, FRANCO MODIGLIANI. The
Journal of Business (pre-1986). Chicago: Oct 1961.Vol.34, Iss. 4; pg. 411, 23 pgs |
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Author(s): |
MERTON
H MILLER, FRANCO MODIGLIANI |
Document types: |
article |
Language: |
|
Language: |
en |
Publication title: |
The
Journal of Business (pre-1986). Chicago: Oct 1961. Vol. 34, Iss. 4; pg. 411, 23 pgs |
Source type: |
Periodical |
ISSN/ISBN: |
00219398 |
ProQuest document ID: |
386549431 |
Text Word Count |
11831 |
Document URL: |
http://proquest.umi.com/pqdweb?did=386549431&sid=24&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
THE effect of a
firm's dividend
policy on the current price of
its shares is a
matter of considerable importance, not
only to the corporate officials who must set the policy, but to investors planning portfolios and to
economists seeking to understand and appraise the functioning of the
capital markets.
|
A
general approach to integrated risk management with skewed, fat-tailed
risks |
Joshua
V Rosenberg, Til Schuermann. Journal
of Financial Economics. Amsterdam: Mar 2006.Vol.79, Iss. 3; pg. 569 |
» |
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documents |
Subjects: |
Studies, Risk
management, Credit risk, Methods, Comparative
analysis, Financial institutions |
Classification Codes |
9130 Experimental/theoretical, 8100 Financial
services industry, 3300 Risk management |
Author(s): |
Joshua
V Rosenberg, Til Schuermann |
Document types: |
Feature |
Publication title: |
Journal
of Financial Economics. Amsterdam: Mar 2006. Vol. 79, Iss. 3; pg. 569 |
Source type: |
Periodical |
ISSN/ISBN: |
0304405X |
ProQuest document ID: |
991581231 |
Document URL: |
http://proquest.umi.com/pqdweb?did=991581231&sid=3&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
Integrated risk
management for financial institutions requires an approach for aggregating
risk types (market, credit, and operational) whose distributional shapes
vary considerably. We construct the joint risk distribution for a typical
large, internationally active bank using the method of copulas. This
technique allows us to incorporate realistic marginal distributions
that capture essential empirical features of these risks such as skewness
and fat-tails while allowing for a rich dependence structure. We explore
the impact of business mix and inter-risk correlations on total risk.
We then compare the copula-based method with several conventional approaches
to computing risk. [PUBLICATION ABSTRACT] |
Should
bank runs be prevented? |
Margarita
Samartin. Journal of Banking & Finance. Amsterdam: May
2003.Vol.27, Iss. 5; pg. 977 |
» |
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documents |
Subjects: |
Studies, Liquidity, Risk, Banking industry, Withdrawals |
Classification Codes |
9175 Western
Europe, 9130 Experimental/theoretical, 8100 Financial
services industry |
Locations: |
Europe |
Author(s): |
Margarita
Samartin |
Document types: |
Feature |
Publication title: |
Journal
of Banking & Finance. Amsterdam: May
2003. Vol. 27, Iss. 5; pg. 977 |
Source type: |
Periodical |
ISSN/ISBN: |
03784266 |
ProQuest document ID: |
352407741 |
Document URL: |
http://proquest.umi.com/pqdweb?did=352407741&sid=4&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
This paper extends Diamond
and Dybvig's model [J. Political Economy 91 (1983) 401] to a framework
in which bank assets are risky, there is aggregate uncertainty about
the demand for liquidity in the population and some individuals receive
a signal about bank asset quality. Others must then try to deduce from
observed withdrawals whether an unfavorable signal was received by this
group or whether liquidity needs happen to be high. In this environment,
both information-induced and pure panic runs will occur. However, banks can prevent them
by designing the deposit contract appropriately. It is shown that in
some cases it is optimal for the bank to prevent runs but there are situations where the bank run
allocation may be welfare superior. [PUBLICATION ABSTRACT] |
Equilibrium
bank runs |
James
Peck, Karl Shell. The
Journal of Political Economy. Chicago: Feb 2003.Vol.111, Iss. 1; pg. 103, 21 pgs |
» |
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documents |
Subjects: |
Studies, Economic
models, Game theory, Equilibrium, Banking |
Classification Codes |
9130 Experimental/theoretical, 1130 Economic
theory |
Author(s): |
James
Peck , Karl Shell |
Document types: |
Feature |
Publication title: |
The
Journal of Political Economy. Chicago: Feb 2003. Vol. 111, Iss. 1; pg. 103, 21 pgs |
Source type: |
Periodical |
ISSN/ISBN: |
00223808 |
ProQuest document ID: |
293681431 |
Text Word Count |
1673 |
Document URL: |
http://proquest.umi.com/pqdweb?did=293681431&sid=4&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
A banking system is analyzed in which the class of feasible
deposit contracts, or mechanisms, is broad. The mechanisms must satisfy
a sequential service constraint, but partial or full suspension of convertibility
is allowed. Consumers must be willing to deposit, ex ante. The paper
shows, by examples, that under the so-called optimal contract, the postdeposit
game can have a run equilibrium. Given a propensity to run, triggered
by sunspots, the optimal contract for the full predeposit game can be
consistent with runs that occur with positive probability. Thus the Diamond-Dybvig
framework can explain bank runs as emerging in equilibrium under the optimal
deposit contract. |
Comment
on: Credit
risk transfer and contagion |
Tano
Santos. Journal of Monetary Economics. Amsterdam: Jan
2006.Vol.53, Iss. 1; pg. 113 |
» |
More
Like This - Find similar
documents |
Subjects: |
Models, Insurance
industry, Banking industry, Credit
risk |
Classification Codes |
8200 Insurance
industry, 8100 Financial services industry, 9190 United
States |
Locations: |
United
States, US |
Author(s): |
Tano
Santos |
Document types: |
Commentary |
Publication title: |
Journal
of Monetary Economics. Amsterdam: Jan 2006. Vol. 53, Iss. 1; pg. 113 |
Source type: |
Periodical |
ISSN/ISBN: |
03043932 |
ProQuest document ID: |
978731851 |
Document URL: |
http://proquest.umi.com/pqdweb?did=978731851&sid=10&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
A salient feature
of the model presented by the authors is the fact that both the banking
and the insurance sectors are explicitly considered. Insurance companies
have had a more active role in areas where their presence was not traditionally
felt and it is important to understand what this new role entails for
the financial system as a whole. Here, the emphasis of the authors is
on the increased role of insurance companies as sellers of credit protection
to the banking sector. |
Credit
risk modeling with affine
processes |
Darrell
Duffie. Journal of Banking &
Finance. Amsterdam: Nov 2005.Vol.29, Iss. 11; pg. 2751 |
» |
More
Like This - Find similar
documents |
Subjects: |
Credit
risk, Default, Correlation
analysis, Studies, Economic
models, Markov analysis |
Classification Codes |
9130 Experimental/theoretical, 3400 Investment
analysis & personal finance, 1130 Economic theory |
Author(s): |
Darrell
Duffie |
Document types: |
Feature |
Publication title: |
Journal
of Banking & Finance. Amsterdam: Nov 2005. Vol. 29, Iss. 11; pg. 2751 |
Source type: |
Periodical |
ISSN/ISBN: |
03784266 |
ProQuest document ID: |
898253911 |
Document URL: |
http://proquest.umi.com/pqdweb?did=898253911&sid=10&Fmt=2&clientId=18913&RQT=309&VName=PQD |
Abstract
(Document Summary) |
This article combines
an orientation to credit
risk modeling with an introduction
to affine Markov processes, which are particularly useful for financial
modeling. We emphasize corporate credit
risk and the pricing of credit
derivatives. Applications of affine processes that are mentioned include
survival analysis, dynamic term-structure models, and option pricing
with stochastic volatility and jumps. The default-risk applications
include default correlation, particularly in first-to-default settings.
The reader is assumed to have some background in financial modeling
and stochastic calculus. [PUBLICATION ABSTRACT] |