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Contingent Claim Analysis
In finance, a contingent claim is a derivative whose future payoff depends on the value of another “underlying” asset,Dale F. Gray, Robert C. Merton and Zvi Bodie. (2007). Contingent Claims Approach to Measuring and Managing Sovereign Credit Risk. ''Journal of Investment Management'', Vol. 5, No. 4, (2007), pp. 5–28 M. J. Brennan (1979). The Pricing of Contingent Claims in Discrete Time Models. ''The Journal of Finance''. Vol. 34, No. 1 (Mar., 1979), pp. 53-68 or more generally, that is dependent on the realization of some uncertain future event.Sean Ross What kinds of derivatives are types of contingent claims? Investopedia These are so named, since there is only a payoff under certain contingencies."Approaches to valuation", Ch2. in Aswath Damodaran (2012). ''Investment Valuation: Tools and Techniques for Determining the Value of any Asset''. John Wiley & Sons. Any derivative instrument that is not a contingent claim is called a forward commitment. The prototypical c ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Finance
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of financial economics bridges the two). Finance activities take place in financial systems at various scopes, thus the field can be roughly divided into personal, corporate, and public finance. In a financial system, assets are bought, sold, or traded as financial instruments, such as currencies, loans, bonds, shares, stocks, options, futures, etc. Assets can also be banked, invested, and insured to maximize value and minimize loss. In practice, risks are always present in any financial action and entities. A broad range of subfields within finance exist due to its wide scope. Asset, money, risk and investment management aim to maximize value and minimize volatility. Financial analysis is viability, stability, and profitabil ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Intertemporal Equilibrium
Intertemporal equilibrium is a notion of economic equilibrium conceived over many periods of time. In modern economic theory, most models explicitly take into account the fact that the economy evolves over time, and that its equilibrium cannot be fruitfully analyzed from a purely static perspective. Therefore the general equilibrium of the economy is conceived as an intertemporal equilibrium, meaning that households and firms are assumed to make intertemporal decisions. That is, households are assumed to choose consumption and labor on the basis of wages, prices, utility, and wealth over their whole lifetimes, instead of considering these quantities at just one point in time. Likewise, firms are assumed to choose hiring, investment, and output on the basis of productivity and demand over the foreseeable future, instead of considering these quantities at just one point in time. The intertemporal general equilibrium is then analyzed as the Nash equilibrium or competitive equilibrium ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Rational Pricing
Rational pricing is the assumption in financial economics that asset prices - and hence asset pricing models - will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is useful in pricing fixed income securities, particularly bonds, and is fundamental to the pricing of derivative instruments. Arbitrage mechanics Arbitrage is the practice of taking advantage of a state of imbalance between two (or possibly more) markets. Where this mismatch can be exploited (i.e. after transaction costs, storage costs, transport costs, dividends etc.) the arbitrageur can "lock in" a risk-free profit by purchasing and selling simultaneously in both markets. In general, arbitrage ensures that "the law of one price" will hold; arbitrage also equalises the prices of assets with identical cash flows, and sets the price of assets with known future cash flows. The law of one price The same asset must trade at the same price on all ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Real Options Valuation
Real options valuation, also often termed real options analysis,Adam Borison ( Stanford University)''Real Options Analysis: Where are the Emperor's Clothes?'' (ROV or ROA) applies option valuation techniques to capital budgeting decisions.Campbell, R. Harvey''Identifying real options'' Duke University, 2002. A real option itself, is the right—but not the obligation—to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project. For example, real options valuation could examine the opportunity to invest in the expansion of a firm's factory and the alternative option to sell the factory.Nijssen, E. (2014) Routelegde, 2014. Real options are generally distinguished from conventional financial options in that they are not typically traded as securities, and do not usually involve decisions on an underlying asset that is traded as a financial security. A further distinction is that option holders here, i.e. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Real Options Valuation
Real options valuation, also often termed real options analysis,Adam Borison (Stanford University)''Real Options Analysis: Where are the Emperor's Clothes?'' (ROV or ROA) applies option valuation techniques to capital budgeting decisions.Campbell, R. Harvey''Identifying real options'' Duke University, 2002. A real option itself, is the right—but not the obligation—to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project. For example, real options valuation could examine the opportunity to invest in the expansion of a firm's factory and the alternative option to sell the factory.Nijssen, E. (2014) Routelegde, 2014. Real options are generally distinguished from conventional financial options in that they are not typically traded as securities, and do not usually involve decisions on an underlying asset that is traded as a financial security. A further distinction is that option holders here, i.e. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
List Of Finance Topics
The following outline is provided as an overview of and topical guide to finance: Finance – addresses the ways in which individuals and organizations raise and allocate monetary resources over time, taking into account the risks entailed in their projects. Overview The term finance may incorporate any of the following: * The study of money and other assets * The management and control of those assets * Profiling and managing project risks Fundamental financial concepts * Finance ** Arbitrage ** Capital (economics) ** Capital asset pricing model ** Cash flow ** Cash flow matching ** Debt *** Default *** Consumer debt *** Debt consolidation *** Debt settlement *** Credit counseling *** Bankruptcy *** Debt diet *** Debt-snowball method *** Debt of developing countries **Asset types *** Real Estate *** Securities *** Commodities *** Futures *** Cash ** Discounted cash flow ** Financial capital *** Funding ** Entrepreneur *** Entrepreneurship ** Fixed incom ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Risk-neutral Measure
In mathematical finance, a risk-neutral measure (also called an equilibrium measure, or '' equivalent martingale measure'') is a probability measure such that each share price is exactly equal to the discounted expectation of the share price under this measure. This is heavily used in the pricing of financial derivatives due to the fundamental theorem of asset pricing, which implies that in a complete market, a derivative's price is the discounted expected value of the future payoff under the unique risk-neutral measure. Such a measure exists if and only if the market is arbitrage-free. The easiest way to remember what the risk-neutral measure is, or to explain it to a probability generalist who might not know much about finance, is to realize that it is: # The probability measure of a transformed random variable. Typically this transformation is the utility function of the payoff. The risk-neutral measure would be the measure corresponding to an expectation of the payoff wit ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Arrow-Debreu Security
In financial economics, a state-price security, also called an Arrow–Debreu security (from its origins in the Arrow–Debreu model), a pure security, or a primitive security is a contract that agrees to pay one unit of a numeraire (a currency or a commodity) if a particular state occurs at a particular time in the future and pays zero numeraire in all the other states. The price of this security is the state price of this particular state of the world. The state price vector is the vector of state prices for all states. See . The Arrow–Debreu model (also referred to as the Arrow–Debreu–McKenzie model or ADM model) is the central model in general equilibrium theory and uses state prices in the process of proving the existence of a unique general equilibrium. State prices may relatedly be applied in derivatives pricing and hedging: a contract whose settlement value is a function of an underlying asset whose value is uncertain at contract date, can be decomposed as a linear ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Journal Of Investment Management
''The Journal of Investment Management (JOIM)'' is a quarterly refereed journal which seeks to be a nexus of theory and practice of investment management. ''The Journal of Investment Management'' offers in-depth research with practical significance utilising concepts from the economics and accounting disciplines. The editor is Gifford H. Fong, founder of Gifford Fong Associates, a boutique bond and equity analysis firm. The journal is published by Stallion Press and has an ISSN An International Standard Serial Number (ISSN) is an eight-digit serial number used to uniquely identify a serial publication, such as a magazine. The ISSN is especially helpful in distinguishing between serials with the same title. ISSNs ... of 1545-9144. References {{reflist External linksJOIM Economics journals Finance journals English-language journals Publications established in 2003 Quarterly journals ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Mark Rubinstein
Mark Edward Rubinstein (June 8, 1944 – May 9, 2019) was a leading financial economist and financial engineer. He was ''Paul Stephens Professor of Applied Investment Analysis'' at the Haas School of Business of the University of California, Berkeley. He held various other professional offices, directing the American Finance Association, amongst others, especially portfolio insurance and the binomial options pricing model (also known as the Cox- Ross-Rubinstein model), as well as his work on discrete time stochastic calculus more generally. Along with fellow Berkeley finance professor Hayne E. Leland and adjunct professor John O'Brien, Rubinstein developed the portfolio insurance financial product in 1976. (This strategy later became associated with the October 19, 1987, Stock Market Crash; see ). With Leland and O'Brien he also introduced the first exchange-traded fund (ETF) in the United States. Rubinstein popularized the term " exotic option" in 1990/92 working pape"Ex ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Frank Fabozzi
Frank J. Fabozzi is an American economist, educator, writer, and investor, currently Professor of Practice at The Johns Hopkins University Carey Business School and a Member of Edhec Risk Institute. He was previously a Professor of Finance at EDHEC Business School, Professor in the Practice of Finance and Becton Fellow in the Yale School of Management, and a Visiting Professor of Finance at the Sloan School of Management at the Massachusetts Institute of Technology. He has authored and edited many books, three of which were coauthored with Nobel laureates, Franco Modigliani and Harry Markowitz. He has been the editor of the '' Journal of Portfolio Management'' since 1986 and is on the board of directors of the BlackRock complex of closed-end funds. Early life and education He earned a BA (magna cum laude) and an MA in economics from the City College of New York, both in 1970. He also earned a doctorate in economics from the City University of New York in 1972 . He is a Certified ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
State Price
In financial economics, a state-price security, also called an Arrow–Debreu security (from its origins in the Arrow–Debreu model), a pure security, or a primitive security is a contract that agrees to pay one unit of a numeraire (a currency or a commodity) if a particular state occurs at a particular time in the future and pays zero numeraire in all the other states. The price of this security is the state price of this particular state of the world. The state price vector is the vector of state prices for all states. See . The Arrow–Debreu model (also referred to as the Arrow–Debreu–McKenzie model or ADM model) is the central model in general equilibrium theory and uses state prices in the process of proving the existence of a unique general equilibrium. State prices may relatedly be applied in derivatives pricing and hedging: a contract whose settlement value is a function of an underlying asset whose value is uncertain at contract date, can be decomposed as a line ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
