# 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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### Flow budget constraint in a paper by Garleanu and Panageas

I am reading this paper and got confused by Equation (6) in said paper. Suppose there is an investor that can trade in riskless bonds that pay interest rate $r_t$, and holds a market portfolio with ...
1 vote
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### Background courses for MSc in Finance

I'm a Mathematics bachelor student and next year I am going to pursue a 2-year MSc in Finance. In this question, as a total beginner in Finance and more generally in Economics, I'd like to get ...
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### Portfolio Construction

Consider a one-factor pricing model where the dependent variable is the spread between a 5y Credit Default Swaps index and the 5y Treasury Note, while the factor is a stock market index. Assume that ...
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### What is the rationale behind randomly denying clients for loans

Bank AAA is the only bank in the country and it has a very strange loan policy. It sets a relatively low interest rate for loans (but still high enough to make a profit) so that the demand for loans ...
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1 vote
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### How to derive Fisher's equation?

Guys help me derive Fisher's equation or suggest references that have the derivation. I am looking for this relation: (1+i)=(1+r)(1+π)
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### Chan Park - Fundamentals of Engineering economics - 1st edition - Chapter 5 - Present value - 5.8

hope I could ask some help around here. I'm working with Chan S Park book Fundamentals of Engineering Economics, 1st edition. I'm in the problem 5.8, page 171. Which states: Your firm is considering ...
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### Was must we invest in the highest NPV project?

I have this simple problem about Net Present Value (NPV) and I was wondering why should we maximise it. Suppose you have a firm and you can either sell it now for $\\\$ $200.000 or invest$ \\\30....
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### What, quantitatively, is the problem with treating two conceptually nearby trading indicators as independent pieces of evidence?

Suppose you come across a financial trading system which starts by checking a security's 200-Period Moving Average, either by itself or in conjunction with the security's price data, perhaps signaling ...
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1 vote
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### Price discrepancy between the same company's stock on two exchanges

The graph shows a company's stock prices on two exchanges: New York Stock Exchange (NYSE) and Oslo Stock Exchange (OSE). Since these prices are denominated in different currencies, the NYSE price is ...
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### Does the near-zero value of Fannie and Freddie shares indicate the validity of the Discount Dividend Model?

The Discount Dividend Model posits that the value of equities is equal to the discounted value of future dividend payments of a firm; for a firm that doesn't pay a dividend, you presume that they are ...
283 views

### How to prove the value of a European Call Option is convex on the underlying’s price?

I know the payoff of a European Call at expiration is $\max\{S_T - K,0\}$, where $S_T$ is the underlying price at expiration and $K$ is the strike price. I want to prove convexity of the value of a ...
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### Funding the American Economy During the Gilded Age

Does anyone know how John Pierpont Morgan Sr. funded the American economy during the Gilded Age? I'd like to learn about his methods and the significant role he played in shaping the economy through ...
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I am tracking my portfolio in Google Sheets. I have columns like daily NLV, % and value change etc. This stats are used to calculate some extra data and draw performance charts. Now, I want to ...
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### Stochastic discount factor derivation

What are the intermediate steps to arrive at equation (4) in Lettau and Wachter 2007? Here is the paper: https://drive.google.com/file/d/1Bc0oOqKGm0otYbywf5gdfwzpRpA-D11p/view I am confused why there ...
57 views

### Habit formation ala Constantinides (1990)

Consider the following problem, from Constantinides (1990). \begin{align} V(W_0, x_0) \equiv \max_{c, \alpha} \mathrm{E}_0 \int_0^\infty e^{-\rho s}\gamma^{-1}[c(s) - x(s)]^\gamma \mathrm{d}s, \end{...
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### In bond markets, how does the number of banks in an underwriter syndicate grow as they share risk on larger deals?

If I look at a large collection of underwriter syndicates (underwriting green bond issuances), I can see there is, on the whole, a quadratic relationship between the value $v$ in USD that the ...
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### What would be a truly universal currency?

I have no clue where to ask this, so here it goes... With the advent of LK99 and its potential uses in recent solutions for modified Alcubierre drive fields, it pushes me to wonder: What if humanity ...
1 vote
37 views

### How to calculate returns for other frequencies?

Hey am newb started studying economics I have questions about returns of any asset I know how to calculate annualized returns by (1+returns)^(1/N)-1=annualized_returns N=number of periods Let's say I ...
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### Do market volatility and optimal trade confirmation strength correlate?

In this video, it is suggested that in high volatility markets, trading algorithms which wait for more confirmation to buy perform better than trading algorithms which buy more quickly, while in low ...
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1 vote
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### Implications for the economics literature of possible mistakes in Black-Scholes-Merton option pricing?

If this preprint (which is discussed here on QSE) is correct in showing that there are mathematical mistakes in the Black-Scholes-Merton option pricing framework, are there strands of the economic ...
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1 vote
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### Budget-feasible set in a portfolio choice problem

I am going through Duffie's Dynamic Asset Pricing book, and already ran into something that confused me on the third page. First, some definitions. Let $\{1, \cdots, S\}$ be a finite set of states, $D$...
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### How to correctly calculate my real salary?

My salary is \$900 after taxes. This is quite a large salary for my country. And when my parents found out about it, they said that I earn a lot. But in my opinion it is not so, because in order to do ...
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### Real debt burden

Many economists believe real interest payments-to-GDP is a superior measure of debt service burden than nominal interest payments-to-GDP. My question is why we divide real interest payments by nominal ...
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1 vote
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### What is the intuition behind the different information structures from the static to the continuous time ones?

It is a difficult and challenging problem at the same time, to model the information structure in theoretical models of economics and finance. The information structure in most of the literature is ...
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