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As mentioned in the comments this comes down to stylistic choices, since as you correctly pointed out: $$u(c_t)+\beta E_t[u(c_{t+1})]=E_t[u(c_t)+\beta u(c_{t+1})]$$ However, in principle both expressions are correct. The first expression states that the $U_t(c_t, c_{t+1})$ is a composite function of present utility of consumption $u_t(c_t)$ and expected ...


2

The answer is more complex than you realize so there's no one size fits all answer. The simplest answer is that nearer term options cost less so the ROI is higher if you get a move in your direction. Suppose that you are buying at-the-money calls. The extreme example is a very large move in your favor that drives all of the now in-the-money option price ...


2

You may profit more off of short-term options in terms of returns. The reason is simple: with less time to expiry, the time value of an out-of-the-money option is near 0. However, this is only true if the options expire in-the-money -- a huge "if." There are a few caveats that are crucial: Options impound the entire future expected distribution of ...


2

I pretty much agree with the answer that Brian provided except for: As for the effect of monetary aggregates, there are any number of reasons to expect that their changes will have no observable linkage to activity. This is not a conventional view hold by mainstream economists, although to Brian's credit he points that out by saying: Nevertheless, some ...


1

Hidden on the third page (left column, middle) you can find that the markets they set up experimentally comprised 8 buyers and 4 sellers. If you multiply the individual demand and supply values from Table 1 by the corresponding number of individuals, you get the linearly approximated demand and supply functions stated on the second page.


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I think the answer just comes down to rounding error. The reported values of $\delta$ are annualized. In the case of the CC1999 calibration, the annualized $\delta$ is $0.90$ and the implied monthly is $\delta = 0.991258$. Because of the compounding over 12 periods (4 in the Wachter 2005/2006 case), the average risk-free rate is very sensitive to small ...


1

As currently written, the question text (and not the title) refers to both the fiscal stimulus and the increase in various monetary aggregates. These are two different things. On the fiscal side, the bulk of the measures were designed to provide bridging income so that firms and households can continue to operate as they did before despite income ...


1

There are experts in distressed debt. They buy the debt at a deep discount to face value, with the belief that the salvage value is greater than what they paid. To do this successfully, knowledge of how bankruptcy works is required. Different types of debt have different priorities in bankruptcy. In most cases, bonds are deeply subordinated, and so often ...


1

In short: Yes, a stock is worth whatever people are willing to buy and sell it for. However, the price people are willing to buy at (or sell at) depends on earnings. A company’s worth is influenced by its earnings and I don’t want to pay more for a company than its worth. Overly simplified: The more money a company takes in, the more money it is worth. Also ...


1

If markets are efficient, the option premium will equal the expected return on the option. This is independent of the past history of the underlying security. In order for the past history to matter, you will need to demonstrate market inefficiency. It is possible to demonstrate some market inefficiencies (e.g., the fixed income pricing literature is ...


1

If you visit Ken French's website (specifically, his data library), you can download monthly and daily returns for the 5-factor model (as well as similar returns for the Carhart momentum factor). You can then find annual averages for those and compute the cost of equity in a similar way as for the CAPM.


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Exchange-traded notes are notoriously illiquid, as discussed in Henderson, Pearson, and Wang (2015). In particular, their only market makers are generally the issuers. Therefore, any move by holders to trade ETNs can have very large price impact. Since the shares were delisted and moved to the Pink Sheets, they are even less liquid since many institutional ...


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I would recommend you read Kroencke (2017). That paper dismantles the problem in a lot of prior (flawed) consumption-based asset pricing research as well as explaining some findings for what were seemingly better proxies. It is a fantastic bit of work and likely not yet in some of the texts you might encounter.


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They differ in the type of Derivative Contract that is chosen. A Swap would be an agreement with a second counterparty, in which in your example, the bank would swap or trade their interest rate asset, with a second counterparty, and which the bank would receive another asset from the second counterparty, and they agree to hold these swapped assets for a ...


1

The Investopedia article is correct. Isn't your maximum profit when P≤77? Then you can exercise your 77P, but the call holder can't exercise his 97C. Your profit =77−P− options premiums. You haven't accounted for the loss on the stock (Investopedia did). It is: stock price + strike price - collar cost (-80 +77 -1.50) Isn't your maximum loss when P≥97? ...


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Options can be used in three major ways: Buying them for speculation (long calls or long puts) Selling them for income (short puts, covered calls) Using them to hedge other positions, aka insurance (put protected stock) Note that there is some overlap in these three categories. For example, spreads would qualify as income oriented and hedging. To keep it ...


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