Questions tagged [financial-economics]
A branch of economics focusing on monetary activities, in which money of one type or another is likely to appear on both sides of a trade
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Digital Impact on External Audit?
Do any of you have theses, research papers, or articles related to the topic of 'Digital Impact on External Audit'? I am a Ph.D. student, and I have been struggling to find a professor to supervise my ...
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what are the root causes that lead to the 2008 economic recession?
looking at factors that were the roots of the recession in the late 2000s, mortgage-backed securities was one. Can the community reinvestment act be counted as another? Are there any other factors ...
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what is the process of selling a loan/mortgage?
i was doing some research on the 2008 financial crisis and the term "sold mortgages" and "bundled up mortgages" keeping appearing. i'm relatively new to this subject so i cant ...
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how does Fed's discount rate affect risk-free rate
So the Fed's discount rate is the rate charged on commercial banks for borrowing funds from it. The question is how does the Discount rate affect the overall level of interest rates in the economy ...
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Failure to see economic depressions and financial fraud due to Shortage of capable quantitative finance & financial engineering experts [closed]
I was trying to understand why economic depressions and financial fraud occurs every now and then.
Is one of the reasons because there is lack of people with strong quantitative finance & ...
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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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How to get range of possible returns on market portfolio from two points on minimum variance frontier
I am revising for an exam in financial economics and have come across this part paper question, which has left me completely stuck:
"Consider a CAPM economy with just three risky assets, A, B, ...
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how to forecast smaller balance sheet items
How might you forecast smaller line items on the balance sheet? For example like current liabilities, current portion of long-term debt or notes payable when doing a 3-statement model?
Would it be ...
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Mean regression model question
This question is proving unusually confusing. I would greatly appreciate your help and also your patience...I'm going to upload this question/mark scheme via screenshot. I know that is frowned upon, ...
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What are the purely financial implications of exempting taxes for the public spending?
I've had this question for quite a long time by now ; wouldn't it be far more efficient in terms of administrative costs and beuraucratic efficiency to exempt public spendings from its taxes?
Of ...
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Concern about Effective Annual Rate in textbook and reality
When reading the seminal textbook of Bodie, Kane and Marcus, 2014, chapter 5, page 123 they have the equation for Effective Annual Rate is
It is quite strange to me because the rf(T) should be rf(T)/(...
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Constructing Valuation As a Function of Condition
Suppose there is an item that deteriorates with use, its condition expressed as a number between $0$ (completely broken condition) and $1$ (perfect condition), for which I want to assign a monetary ...
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In the Diamond-Dybvig model, why does the long-term investment not offer a liquidity risk premium?
In the basic version of this model (see link below), both the short-term asset (deposit) and the long-term investment (“technology”) are considered to be risk-free (that is, there is only one possible ...
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Industry-specific control variables
I am writing about bank-lending to a specific industry and how that could be affected by the level of carbon intensity of a given industry within the EU. I have some thoughts on this:
Trying to think ...
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Who controls banks in Diamond's model?
In Diamond's model banks are delegated to monitor borrowers for the investors, in this case, who monitors the banks?
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Options, Futures and other derivatives, book by Hull, confusion of currencies
I have a small technical problem with a book by Hull:
on the page 7, the first line, in the 11th edition of his book
Options, Futures and Other Derivatives (please see the snippet below) he writes
&...
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What does L mean in the money demand equation?
(M/P)^d=L(i,Y)
M=Money supply
P=Price
d=Demand
i=Nominal interest rate
Y=?Output
Does L mean liquidity? Or does it simply mean that the LHS depends on i and Y?
Thank you!
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Why are full reserve banks called such, when they still have depositors?
Why do full reserve banks put all their depositors' money in reserve while depositors still have the right to deposit?
Why is it called full reserve banking when people can deposit their money there?
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Question about money supply and the nominal interest rate
How does an increase in money supply, due to a decrease in the REPO rate, decrease the nominal interest rate?
If an increase in money supply means more inflation, how doesn't inflation lead to ...
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Why S̅=I(r) and S=I?
Why is S̅ constant when it's equal to I(r)?
Why is S inconstant when it's =I?
Thank you!
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Is the viability of a limited supply currency dependent on the equality or inequality of its distribution among potential users?
Presumably, the more unequal the distribution of a limited supply currency among potential users, the more advantage early accumulators have vs latecomers; as soon as the early accumulators begin to ...
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Human Rationality and Marginal Utility
Does marginal utility consider human irrationality? For example, if the marginal utility of product x > price(x), is the human certainly going to purchase product x is he/she is aware of it?
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ETF market during severe crash
Question: Does the decentralized creation and redemption process make ETFs fragile in case of a market crash?
While the idea of ETFs is obviously great, I am a bit skeptical whether the tradeability ...
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Fundamental knowledge about invest, stock and economics for self learning [closed]
I am not expertised in the field of economics and stock so I do not know anything about invest. Would anyone please recommend any book/textbook for the initial leaner to get understanding of all these ...
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who exactly determine market price?
I am aware it's all about supply and demand
When a lot of party buying USD with EUR, USD price will increase. EUR will decrease it's stand against USD. And vice versa
But who exactly determine the ...
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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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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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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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What is the Likelihood and Impact of US Treasury Bonds being Callable again?
Since 1985 US Treasury bonds have been issued as non-callable. I suspect this had significant impact on investors who wish buy treasuries and also impacted their hedging properties.
First, what ...
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Most notable papers in Economics in 2021
This question is based on this one in Math Overflow
I understand that I can't simply 'translate' the question into the area of economics. Thus, I'm open to improvements on the question framework.
Here'...
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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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Rational and behavioral decision in finance investment
Can anyone advise me how to measure an investor's rationality using numbers (indexes for example) in the investment decision? I would like to study this, but I don't know what methodology to adopt to ...
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Unresolved paradoxes or puzzles in financial economics
What are some (unresolved) paradoxes or puzzles in financial economics?
I am looking for paradoxes or puzzles like for example:
The equity premium puzzle (Mehra & Prescott, 1985).
Siegel's ...
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How come there is inflation in a model with no money?
I'm watching the video lectures of Financial Theory (ECON 251) by John Geanakoplos, Yale University. In Lesson 5, Chapter 4 at 33:41, Geanakoplos defined inflation as the ratio of prices between two ...
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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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What would happen if we eliminated fractional reserve banking while expanding the money supply?
In a fractional reserve banking system, banks can lend out more money than they hold in cash. For example, with a 10% reserve requirement, they can lend out 9 times as much money as they hold in ...
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The share of the labor force in GDP (including wages and transfers to social protection, %) [closed]
What do the countries with the highest value for this indicator have in common (the share of labor in GDP, including wages and transfers for social protection, %) ? Conversely, what do the countries ...
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the share of the labor force in GDP, including wages and transfers to social protection, %
Why is this indicator (the share of the labor force in GDP, including wages and transfers to social protection, %) used as an indicator that indicates the level of inequality in society?
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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?
Edit: Can complete hold even if $d < u \le 1+R$ or $1+R \le d < u$ ?
In Tomas Björk's Arbitrage Theory in Continuous Time, there exists this proposition
It seems that to show that the model is ...
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Does using different Analysis Methods give the same better alternative to choose between economic projects?
Will all analysis methods (PW-FW-AW-ROR-B/C) that we can use for determining project acceptability on an economic basis gives you the correct same-alternative for the same cash-flow always?
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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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Understanding Mortgaged Backed Security during financial crisis
This is my understanding of the mortgage backed security.Banks will give loans to customers, and then they decide to sell the loans to investment banks and charge a fee with it to earn profit. Now the ...
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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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Rationalising today's bond market and stock market
As of this writing, the 10-year T note yields 1.437%, on a steady 3-month downward trend (from 1.55-1.75% in recent months) while the S&P 500 is nearing all-time-highs. When these long-term bond ...
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How do I calculate the price and risk of a senior tranche?
Say I grant two risky X years loans P(default)=0.1 of 1000 USD. For simplicity let us assume that the interest rate is 0.
I want to sell a X years Senior tranche of 1000 USD and a Junior tranche of ...
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How to handle the missing values' issue of newly listed stocks?
I am trying to test some asset pricing models on 10 portfolios for the period of 2010-2020. The problem is that three of these portfolios included stocks that are newly listed in 2017 and 2018, so I ...
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Quote or price driven markets
Where can I find some details about quote driven markets? Can anybody show any notes or provide some paradigm about what the trader sees when he is about to trade in such a market? They say that he/...
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Maximum of conditional expectation
I have a statistics question for the insider problem in the Kyle (1985) model:
How does one go from
$\max\limits_{X} E[(v-\bar{v}-\lambda(X+u))X|v]$
to
$\max\limits_{X} (v-\bar{v}-\lambda X)X$ ?
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risk aversion and convexity of indifference curve
This is a question from the CFA exam. With respect to utility theory, the most risk-averse investor will have an indifference curve with : (a) greatest slope coefficient (b) most convexity The answer ...
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