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An interval portfolio selection problem based on regret function


An interval portfolio selection problem based on regret function
Silvio GioveStefania FunariCarla NardelliEuropean 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 GreysermanDouglas H JonesWilliam E StrawdermanJournal of Banking & Finance. Amsterdam: Feb 2006.Vol.30, Iss. 2;  pg. 669
 
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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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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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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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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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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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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, JohnMasse, Isidore J.Journal of Financial and Quantitative Analysis. Seattle: Mar 1981.Vol.16, Iss. 1;  pg. 23, 12 pgs
 
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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 FabozziFrancis GuptaHarry M MarkowitzJournal of Investing. New York: Fall 2002.Vol.11, Iss. 3;  pg. 7
 
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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 GrahamCampbell R HarveyJournal of Financial Economics. Amsterdam: May/Jun 2001.Vol.60, Iss. 2,3;  pg. 187
 
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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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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, MYRONThe 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 HankeJournal of Economic Dynamics & Control. Amsterdam: Mar 2005.Vol.29, Iss. 3;  pg. 389
 
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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 NielsenMaria VassalouEconomic Theory. Heidelberg: Aug 2006.Vol.28, Iss. 3;  pg. 651
 
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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, MarkJournal of Financial Economics. Amsterdam: Sep 1979.Vol.7, Iss. 3;  pg. 229
 
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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 DeAngeloLinda DeAngeloJournal of Financial Economics. Amsterdam: Feb 2006.Vol.79, Iss. 2;  pg. 293
 
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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 MILLERFRANCO MODIGLIANIThe 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 RosenbergTil SchuermannJournal of Financial Economics. Amsterdam: Mar 2006.Vol.79, Iss. 3;  pg. 569
 
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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 SamartinJournal of Banking & Finance. Amsterdam: May 2003.Vol.27, Iss. 5;  pg. 977
 
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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 PeckKarl ShellThe Journal of Political Economy. Chicago: Feb 2003.Vol.111, Iss. 1;  pg. 103, 21 pgs
 
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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 SantosJournal of Monetary Economics. Amsterdam: Jan 2006.Vol.53, Iss. 1;  pg. 113
 
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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 DuffieJournal of Banking & Finance. Amsterdam: Nov 2005.Vol.29, Iss. 11;  pg. 2751
 
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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]

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