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Results tagged with finance
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user 12891
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 fund managers usually compensated against benchmark?
The format varies. Many firms just charge a straight fee as a percentage of assets, and/or as a percentage of in/outflows e.g., mutual funds.
For fund managers that are not hedge funds, returns are c …
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vote
Accepted
Futures delivery price
Different futures contracts have different delivery/final settlement machanisms. You need to look up each contract’s specifications.
The U.S. Treasury bond/note futures are an example of a complicate …
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2
votes
How is it cheaper to take on debt when taking on a project?
I assume EBT = Earnings before tax.
Take a \$200 project with a 6% return on assets. If 109% equity financed, EBT = \$12 (6% return).
If debt has a cost of 5%, and 50% financed (\$100 borrowed), ear …
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Why would a lay investor care about a Leveraged ETF's Exposure Before and After Reset?
It’s a 2x levered ETF. It has an exposure that is -2 times the size of the fund. The exposure determines how much the fund gains or loses in response to a change in the underlying asset.
Since the e …
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1
vote
Accepted
How does this graph show 3000 In the Money June 19 $130 puts traded?
It’s a chart of the underlying stock. It does not show anything about options.
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Accepted
Is it easier to profit from selling, than buying, options?
The logic given in the question is inadequate, since it misses the point that upside potential in long option positions is much higher than the upside potential for a short option position.
If one wer …
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2
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Why is basis point defined as "1/100 of a percent"?
The way in which basis points are almost invariably used is as a spread relationship (at least in fixed income). That is, it is the difference between two yields.
Yields are quoted as percent. (If you …
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0
votes
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Calculation of term structure
The wording of the question is vague, but I will assume that the objective is to get a zero/discount curve via bootstrapping.
The premise of a bootstrapping is straightforward: fit a zero curve so tha …
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1
vote
Accepted
Clarifying the meaning of market capitalization
The "shares outstanding" variable used in the calculation of market capitalisation is defined as all shares that exist (and not was issued in public offerings). The market capitalisation is the share …
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0
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Bank maturity mismach
There’s two things of interest: interest rate risk, and liquidity risk.
For liquidity risk, you could compare short-term liabilities to short-term assets. This would be just a ratio. The long-term bu …
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0
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Accepted
Black-Scholes Model question
For simplicity, numbers are in millions.
We assume that markets are efficient, and that the value of equity and liabilities equals that of assets. So debt + equity = 300. We want to solve for the val …
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Forward rate discounts
First, liquidity discount and premium are in contrast to each other?
Normally, discount and premium are opposites. For example, a bond is trading at a premium to par price if the price is over \$10 …
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What are the pros and cons of a "long stock, short call" position compared to a "short put"?
The primary consideration in practice is that the initial investment is larger if you are long the stock, and thus consumes more balance sheet.
The next consideration is that if you don’t hold to matu …
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What is the difference between quoted price and theoretical value of a bond?
The "clean price" of a bond has a technical meaning. It is the invoice price of a bond (which is what your formula refers to), less the accrued interest. (The invoice price is the total dollar amount …
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Does commercial paper usually carry a higher yield than corporate bonds? Why?
The wording seems incorrect, the only thing that appears to make sense is “higher spread,” since as you note, bonds are issued with longer maturities. The yield differential would depend on the slope …
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