Skip to main content
39 votes
Accepted

Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?

Very obscure historical example: From 1287 to 1295, the Danish nobleman Stig Andersen Hvide was leading a band of outlaws from the island of Hjelm supported by the king of Norway against the king of ...
Ole Krarup's user avatar
28 votes

Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?

https://en.wikipedia.org/wiki/Operation_Bernhard (an exercise by Nazi Germany to forge British bank notes. The initial plan was to drop the notes over Britain to bring about a collapse of the British ...
KarmaPeasant's user avatar
  • 1,135
13 votes

Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?

David Petruccelli writes in "Banknotes from the Underground: Counterfeiting and the International Order in Interwar Europe" In December 1925, a group of Hungarian nationalists were caught ...
Giskard's user avatar
  • 29.3k
9 votes
Accepted

Has anybody seen anything this expression before?

$p\cdot z(p)$ is total revenue (price times quantity), and so its derivative $\frac{\mathrm d}{\mathrm dp}pz(p)=pz'(p)+z(p)$ is marginal revenue.
Herr K.'s user avatar
  • 15.5k
8 votes
Accepted

Why does Russian ruble conversion rate to USD remains constant at 1 to 0.01?

Currently there are quite a few restrictions on US to Russia bank operations. The answer is that Google Finance gets its data for the exchange rates from a specific service, Morningstar, who are ...
Giskard's user avatar
  • 29.3k
7 votes
Accepted

Foundational equations or concepts of Finance

Considering this is an Economics Stack Exchange site, Iā€™m going to answer in the spectre of Financial Economics. These are the most foundational equations and ideas of Financial Economics to ...
Übel Yildmar's user avatar
7 votes
Accepted

What institutions are examples of "shadow banking"?

While whomever told you about "shadow banking" in China is correct that in an international context, the term can often refer to informal banking arrangements (the earliest use of the term); ...
dismalscience's user avatar
7 votes
Accepted

What is the equation $\mathbb{E}[mR]=1$?

This is an important result in financial economics (asset pricing) but not trivial to explain intuitively. I do my best to give you the big picture and get you started on your research. R is the ...
farnsy's user avatar
  • 836
7 votes

Prove that variance of a portfolio cannot exceed variance of individual assets

Let $P = \alpha A + (1-\alpha) B$ where $A$ and $B$ are returns (random) from the two assets, and $P$ is their portfolio. Variance of portfolio $P$ can therefore be written as \begin{eqnarray*} \...
Amit's user avatar
  • 8,986
6 votes

Does an instant settlement system (such as blockchains) eliminate the possibility for short selling?

Imagine: I borrow 1 bitcoin from you and agree to pay you back $(1+r)$ bitcoin in a month. I immediately sell the bitcoin you lent me. One month from now, I buy $(1+r)$ bitcoin and pay you back. If ...
Matthew Gunn's user avatar
6 votes
Accepted

How did the derivatives market 'collapse' in 2008?

The question is quite complex and an answer should be far beyond looking only at the structure of the derivatives, but i try my best. The initial situation: Between 1998 and 2006, the price of the ...
skoestlmeier's user avatar
6 votes
Accepted

What at all justifies income taxes (as opposed to sales taxes only)?

There's a fair amount to unpack in the question, so it might be useful to take it step by step, and consider everything from a more abstract, economic theory perspective. ...those who are more ...
AndrewC's user avatar
  • 1,380
6 votes

Why use marginal rather than average tax rates in incentive analysis?

People make decisions based on how the decision will change things. If I work an extra \$1000 worth of time, then I have to pay $\$1000 * \text{marginal tax rate}$ in taxes. The average rate is ...
Brythan's user avatar
  • 1,182
6 votes
Accepted

Example of Law of One Price holds but No Arbitrage Fails

Examples where this happens are always extreme and contrived. I can think of two kinds of examples. The first is where you have an asset that for some reason has a price of zero or negative but a ...
jmbejara's user avatar
  • 9,355
6 votes
Accepted

Are no arbitrage models and equilibrium models equivalent?

...no-arbitrage models (such as Black-Scholes and HJM) are equivalent to equilibrium models (such as CAPM or C-CAPM). Short Answer Yes, for models where asset prices are assumed to be Ito ...
Michael's user avatar
  • 2,619
5 votes
Accepted

Deriving and using the pricing equation

As regards the first question, the "$p_t=...$" expression is conceptually and qualitatively useful because, at the optimum, it relates price with consumption and expectations. Mathematically it is an ...
Alecos Papadopoulos's user avatar
5 votes
Accepted

Prove that variance of a portfolio cannot exceed variance of individual assets

Let $w$ denote the weight on $A$ so that $1-w$ is the weight on $B$. Recall from the properties of variance that $\sigma_p^2 = w^2\sigma_A^2 + 2w(1-w)\sigma_A\sigma_B \rho_{AB}+ (1-w)^2\sigma_B^2$ ...
farnsy's user avatar
  • 836
5 votes
Accepted

Why is JPY considered a "safe currency"?

Because: they are a massive exporter, meaning their capital account is negative, and thus they own a lot of assets abroad. Therefore, as this site explains: When a crisis erupts, the Japanese ...
luchonacho's user avatar
  • 8,591
5 votes
Accepted

Why do companies sit on cash while they have debt?

Debt is cheap. Flexibility is valuable. They hold debt + cash up to the point where the value of flexibility is still greater than the net cost of servicing the debt minus any interest earnt on the ...
410 gone's user avatar
  • 8,168
5 votes

Utility theory and portfolio optimization: utility of what exactly?

In mean-variance optimisation I have typically seen the below quadratic utility function where $šø[š‘…]$ is the expected return (or mean return) of a possible portfolio, $\sigma^{2}$ is the return ...
M3RS's user avatar
  • 1,087
5 votes
Accepted

Who invented these key notions in Finance?

Net Present Value (NPV) as a soft concept existed probably even in antiquity but it was formalized and made popular by Irving Fisher in his book the Rate of Interest. Internal rate of return is ...
1muflon1's user avatar
  • 57k
5 votes

Proof that stochastic discount factor is positive in complete markets

...the completeness of markets implies that the stochastic discount factor is strictly positive... This statement is not quite correct. Rather, the agent's optimality condition implies that market is ...
Michael's user avatar
  • 2,619
5 votes
Accepted

HARA preferences details

The paper Optimum consumption and portfolio rules in a continuous-time model (Merton (1971)) presents (as far as I know, the initial presentation. [ Next we turn to a paper that discusses the ...
BKay's user avatar
  • 16.3k
5 votes
Accepted

Elasticity of demand functions

In the case of linear demand $d_i=a_i-x_iP$ (assuming $d_i$ is quantity demanded by individual $i$), the price elasticity of demand at point $(d_i,P)$ is \begin{equation} \epsilon_i(d_i,P)=x_i\cdot \...
Herr K.'s user avatar
  • 15.5k
5 votes

Macro papers that an undergrad would be able to replicate

A paper that should not be difficult to replicate and is about cross-section regressions is Barro's paper titled 'ECONOMIC GROWTH IN A CROSS SECTION OF COUNTRIES' (QJE, 1991)
Tony's user avatar
  • 1,262
4 votes
Accepted

Show that $W_t - \int_0^t \xi_s ds$ is forward-measure-Brownian

(Looking at the question and notation used more closely, the formulation seems to be problematic in couple places.) General Fact Let $W$ be standard Brownian motion with respect to filtration $( \...
Michael's user avatar
  • 2,619
4 votes
Accepted

Barro's (2009) rare disaster model in the AER: How to derive equation (10)?

I think Barro means in the footnote that Giovanni and Weil find the same equation, $U_t=\Phi C^{1-\gamma}$, but using the optimal path of $C_t$. In Barro's paper, the approach is different given that ...
GuiWil's user avatar
  • 887
4 votes

Who owns German debt?

This Deutsche Bank figure from 2013 has some broad categories for German debt and compares it with other rich countries: A newer chart, using slightly with more granular categories. Note that Germany ...
BKay's user avatar
  • 16.3k
4 votes

How does the Fama and French 3-factor model explain stock covariance?

There are two ways I could think of to answer this question. First, and I think this is what you are asking, "what is the covariance structure of two assets under the Fama-French 3-factor model?&...
BKay's user avatar
  • 16.3k
4 votes
Accepted

Difference between double auction and continuous double auction?

So, if a distinction is made, as continuous double auctions are usually just called double auctions, then the difference has to do with frequency. It is easier to have an example. The New York Stock ...
Dave Harris's user avatar
  • 2,006

Only top scored, non community-wiki answers of a minimum length are eligible