Questions tagged [finance]

Finance describes the management, creation and study of money, banking, credit, investments, assets and liabilities that make up financial systems, as well as the study of those financial instruments.

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How are stock prices determined in the following cases?

I looked at this question already. I know there is an order book with bid and ask and that the price is updated when a match occurs. But I have two questions: What happens when the bid is higher than ...
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Why are the yields on short-term bonds more volatile than those of long-term bonds?

Why do short term bonds have higher yield volatility but lower price volatility? I believe because of what we call duration prices of long terms bonds are more volatile. But what does yield volatility ...
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How is finance a direct mechanism unless by royalty contracts?

I have been designing software to service payday loans for industry specific royalty contracts since 2018, and have come across the terms direct and honest mechanism design that are unfortunately for ...
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Are interbank positions branch-specific?

I have a hard time envisioning the inner workings of the interbank market. In particular, I am somewhat unsure about the role of banks vs branches. When I think about banks, I typically think about ...
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What data underlies claims that a given portion of finance goes into the productive vs. financial economy? (Mazzucato's Mission Economy)

I'm reading Mission Economy, and Mazzucato claims that "In the US and UK, only about a fifth of finance goes into the productive economy (...companies that want to innovate, infrastructure that ...
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What is the economic interpretation of negative tangible assets for a company?

There are a lot of companies such as: https://finance.yahoo.com/quote/LMT/balance-sheet?p=LMT with negative tangible assets and negative tangible book value per share, where tangible assets can be ...
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How Can I Model Demand Elasticity?

Can demand elasticity be determined by examining the distribution of marginal utility across a potential customer base? For example, if the distribution of marginal utility among potential customers ...
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How many hedge funds are there?

For personal interest. This 2022 special report on hedgeweek.com says, Cayman is domicile to over 23,000 CIVs, including about 80% of all international hedge funds which suggests a maximum global ...
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Is it possible to have mean-variance preferences with different states of nature? Mean-Variance and Expected utility together?

I have to maximize mean-variance preferences like this (where Pi is a profit function): \begin{align} \label{eq:9} \max\limits_{Q_{F}^{\{x\}}}Z_{w}= E[\pi{\{x\}}]-\frac{A}{2}Var[\pi{\{x\}}] \nonumber\\...
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Emerging Market Currencies vs. Developed Currencies during Business Cycle

Emerging market currencies usually outperform developed currencies (USD, Euro, etc.) during the late stage of the business cycle (falling growth, rising inflation) because they are much more ...
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Why other countries stock market fall during war between russia and ukraine

Why other countries stock market is falling during Ukraine Russia war. How does it affects others country's stock market.
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Understanding the Formula For the Accumulation/Distribution

My understanding of the essence of the Accumulation/Distribution Index is that it tracks the closing price of a security during each period relative to its price range for that period, something like ...
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Transform the constraints for both liquidity demanders and suppliers if I include any tax on risky asset?

I have a question related to Vayanos and Wang's article I'm studying on this article for my course term project. I would like to some adjustment and changes on this article in order to improve it ...
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High Kurtosis with normal Distribution

I need help. Here is my problem, I am testing normal distribution on covid, 2008 crisis, and beetween these. So I have 3 timezone and 7 indexes. When I use SPSS to test the normal distribution with ...
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1 vote
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Can the Equity Premium Puzzle apply equally to bonds?

Mehra and Prescott (JME, 1985) use the consumption-based asset price model to express the expected spread of equity returns over, e.g., a risk-free Treasury bond, as \begin{equation*} \mathbb{E}...
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How the money multiplier changes the M1 and M2

I would like to know if my answer to the question below is correct: Question: How much does M1 and M2 change in the following situations? $500 is transferred from a checking to a savings account. ...
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progressive interest rate

I have a product for which the fee is dependent on the proportion of the total that is purchased. The function is Rate = Rate + Withdrawn Capital / Total Capital in ...
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Budget line for mean variance utility

Consider the mean-variance utility used in CAPM. The budget line when allocating a risk-free and a risky asset is the line connecting the $r_f$ and the risky asset. Suppose that I have fixed amount ...
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How can I choose how much to invest in each stock of my portfolio?

I'm trying to find a mathematical way to decide what percentage of my capital I should invest in each stock of my portfolio to maximize my profit. Here's my attempt to the solution: Let's say my ...
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Where to find Index Entries on CRSP (WRDS)

I am trying to find index entries (not delisting data) on CRSP (i.e., where a specific stock with a PERMNO/CUSIP enters the S&P500), but despite trawling through the documentation I am unable to ...
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How should a GARCH (1,1) model look like?

I have a question regarding the GARCH (1,1) model. I have used R to forecast the volatility of some assets. I then plotted the forecasted volatility and the realized volatility on the same plot to see ...
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4 votes
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Why does Russian ruble conversion rate to USD remains constant at 1 to 0.01?

I've been noticing that since Russian ruble started losing its value compared to other foreign currency, at some point it became at constant exchange rate of 1 RUB to 0.01 USD. That is, every day no ...
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why is household equity a liability for households

I am currently reading "An introduction to Central Banking" written by Ulrich Bindseil and Alessio Fotia, which is freely accessible here : https://library.oapen.org/viewer/web/viewer.html?...
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Combining 990 and 990-EZ Data

I've collected 990 and 990-EZ data from the IRS's Annual Extract of Tax-Exempt Organization Financial Data on American Federation of Musicians locals. The data are split about half and half between ...
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-3 votes
1 answer
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What does it mean by the statement "a corporation looses money if it produces more than its value"

Recently I was reading a book on corporate finance titled "corporate finance for dummies". Here in the introduction page the author has given a definition for corporate finance, followed by ...
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Replicate Goldman Sachs' US Financial Condition Index

I am trying to replicate Goldman Sachs' Financial Condition Index for the US. Has anyone done something similar and could help me? Thank you! This is the data description: (i) Policy Rate (4,4% weight)...
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3 answers
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Can banks "create" Bitcoin

I have a stupid question. Could a commercial bank creates Bitcoins the way it "creates" money if it was allowed to make loans in Bitcoins?
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How to compare 2 different payment schedules over 20 year period

I have 2 options for a payment plan and need to calculate the total overall the best option. Both plans are over a 20 years. The total payment amount is identical in both cases but the amounts at each ...
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Understanding Debt Deflation

I read the following explanation for debt deflation in my textbook: To better understand how this decline in net worth occurs, consider what happens if a firm in 2018 has assets of 100 million (in ...
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Probit and DiD - Finance

I have been working on a project for a good long time. I am relatively new to finance and regressions in R, so I would be extremely grateful for every response I get. My goal with this task is to ...
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Sum of LS-LMSR probabilities is greater than 1

I am trying to implement LS-LMSR in a prediction market with binary outcomes: YES and NO. I am implementing this formula as the cost: ...
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Why do we have *daily* series of T-bill yields?

I understand that each week the US Treasury issues new T-bills at different maturities (1-month, 3-months, 1-year, etc). As far as I understand, this issuance happens every Tuesday. After the auction, ...
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Calculating IT Spend Ratio

I have three columns - Sales(Revenue), Employee Count and Industry of n Companies in my sheet, how do I use them to calculate the IT Spend Ratio of these companies using the above info?
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1 vote
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What are good (i.e. non-random walk) time series to perform forecasting on?

I have developed a recurrent neural network (RNN) model for time-series forecasting. I now want to test its performance against more standard statistical/econometric models such as ARIMA or VAR. The ...
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Why is backwardation of a futures curve for a commodity a bullish signal?

Recently, I have been delving into the oil markets and obviously, in this market, the price of oil is very important. In particular, market observers are interested in short-dated and long-dated ...
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1 vote
1 answer
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Bond Price expression

I've researching some mathematical finance and I've stumbled upon something I can't seems to find sources on. I'm probably overlooking something, but I hope someone can enlighten me and give me some ...
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Why do the PV and FV formulas (in Excel, at least) use slightly different geometric series?

With geometric series, I understand that, broadly, you can sum from $1$ to $n$, or from $0$ to $n-1$. Let $r=0.03, p=\\\$10, n = 10$. $\sum_{j=s}^{j=s+n-1}{pa^j}=\frac{p\left(a^{n}-1\right)a^s}{a-1}$ ...
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Harrington Emerson and his 12 principles of labor productivity

Are these principles currently relevant? Which principles would you add or, on the contrary, exclude? Which principles are observed today, and which are not? Why? Which of the principles would you ...
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Combined Buffer Requirements Basel III

Let's take this example: A bank is required to maintain minimal capital requirements according to Basel III as follows: CET1 - 4.5% Tier1 - 6% Tier1 + Tier2 - 8% In addition it has to apply these ...
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Corporate Finance introduction and mentoring for Non-Finance - topics to focus on?

I work for an international engineering company and have been in an engineering position for 10+ years. As part of the career development I have expressed interest to learn more about the finance side ...
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Why do banks need to borrow money (i.e. bond issuance)?

When a bank gives out a loan, a simultaneous liability and asset is created on their balance sheet, and 'external' funding doesn't fit into this picture... so why do they need to borrow money?
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2 votes
1 answer
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$E[F_T] = F_0$ implies $p = \frac{1-d}{u-d}$? or is implied by?

From Ch 12 in Hull's OFOD, we compute the risk-neutral probabilities for a futures contract: Later in Ch 17, futures options are valued, and we have the same result: In relation to Chapter 16 and 17,...
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Arbitrage free implies complete market in general binomial model?

In Tomas Björk's Arbitrage Theory in Continuous Time, there exists this proposition It seems that to show that the model is complete, we must show that the claims are reachable, i.e. we must find ...
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Why do they always say: "this is not financial advice"? [closed]

Every single time there is a video about finance (especially Bitcoin), they always nag on about how: This is not financial advice. And then they give financial advice. Why do they have to say this? ...
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1 answer
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Cash flow of a loan (perspective of a bank)

if you receive a loan from a bank, how does the cash flow of the bank look like? I found the following: https://fincomplete.com/ratgeber/artikel/wie-berechnet-die-bank-meine-kreditzinsen-2 (...
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Will financial markets always heavily penalize the company if the CEO criticizes its products?

https://en.wikipedia.org/wiki/Stephen_Elop#%22Burning_Platform%22_memo https://communities-dominate.blogs.com/brands/2011/08/coining-term-elop-effect-when-you-combine-osborne-effect-and-ratner-effect....
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Was the financial crash of 2008 caused by top graduates of the American Ivy Leagues working at wall street banks?

From this article by Lisandro 'Leloy' Claudio, a Philippine/a Filipino professor of history, politics, South & Southeast Asian Studies (and not necessarily of finance, economics, mathematics or ...
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Have the deregulation measures that caused the 2007-2008 crisis been rolled back?

The 2007-2008 financial crisis was largely attributed to several deregulation measures, especially the Gramm-Leach-Bliley act. Have any of these measures been rolled back after the crisis, or new ones ...
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Can we 'predict' the delta of a stock? The delta of a stock is $\pm 1$ right? [closed]

A stock is like a living organism. A sparrow, say. And we are able to create an emergent-based abstraction of that sparrow, which closely approximates the sparrow itself, accounting for migration ...
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3 votes
1 answer
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Calculating Tobin's q from the financial statements of publicly listed companies

I'm interested in doing some empirical analysis of firm's investment behavior using financial statements (such as asset, working capital, operating cost, etc). One variable I want to manually ...
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