Financial Economics V 3025 Rajiv Sethi Phone: 854 5140 Problem Set 1 Due Date: Tuesday February 5 1. (a) Let P denote the price paid per hundred dollars in face value. Since the market clearing discount rate is 5.10%, we use the de nition of the disc
Financial Economics V 3025 Rajiv Sethi Phone: 854 5140 Problem Set 2 1. If she sells n shares at $7 each, his balance sheet will be as follows Assets Liabilities & Net Worth Cash 7n + 5000 Value of Shares Owed 7n Net Worth 5; 000 so the margin is 500
Economics Department of the University of Pennsylvania
Institute of Social and Economic Research - Osaka University
The Ellsberg Paradox and Risk Aversion: An Anticipated Utility Approach
Author(s): Uzi Segal
Source: International Economic Review, Vol. 28
Introduction
EU
NEU
CEU
Questions
NLE
Uncertainty Analysis: Risk and Ambiguity
Shunming Zhang
Professor of Economics and Finance
School of Finance
Renmin University of China
[email protected] and [email protected]
June 10, 2015
Application
Introduc
Prospect Theory: An Analysis of Decision under Risk
Author(s): Daniel Kahneman and Amos Tversky
Source: Econometrica, Vol. 47, No. 2 (Mar., 1979), pp. 263-292
Published by: The Econometric Society
Stable URL: http:/www.jstor.org/stable/1914185
Accessed: 0
Pagesmt sto salt/,6, 8] (1,19
538 P A R T l V Fixedincome Securities
SUMMARY 1. Even defaultfree bonds such as Treasmy issues are subject to interest rate risk. Longerterm
bonds generally are more sensitive to interest rate shifts than are shortterm bon
PCtCtCSLWOZ #5 3 4, g C: 4 4 10 [L]
500 FA RT lV Fixed income Securities
PROBLEM SETS 1. What is the relationship between forward rates and the markets expectation of future shoe .
rates? Explain in the context of both the expectations and liq
w, JZS'ZZlu mmthl"; le: I
9.
5
t1; 3
Diversication is based on the allocation of a red portfolio across several assets, limiting the
exposure to any one source of risk.Adding additional risky assets to a portfolio, thereby increas-
ing the total amounts i
C H A PTE R 9 The cfw_Japlial ASSEE rating lVlUuti _, . .
simple version of the expected returnbeta relationship holds. But if these distributions change
unpredictably, or if investors seek to hedge nonmarket sources of risk
C H APT E R l 4 Bond Prices and Yields 473
a": miutn bonds investment-grade bonds debenture
count bonds speculative-grade or junk default premium
lized compound return bonds credit default swap (CD5)
3" rizon analysis sinking fund collateralized d
M CH APT E R 6 Risk Aversion and Laplldl allocation w WW, W. , .,
8. The investors degree of risk aversion is characterized by the slope 0 er indiherence
at any level of expected realm and risk, the required risk pre
curve. Indifference curves show,
rage
l0.
ll.
iv
Pack: on )ji
C H A PT E R 1 8 Equity Valuation Models
. In what circumstances would you choose to use a dividend discount model rather than a free
cash flow model to value a rm?
In what circumstances is it most important to use multistage div
mm a I 15 u.- or g W
CHAPTER 8
3. Optimal active portfolios constructed from the index model include analyzed securities in propor-
tion to their information ratios. The full risky portfolio is a mixture of the active portfolio and the
pas
economy is making a rapid recovery from steep recession, and businesses foresee a need
nrge amounts of capital investment. Why would this development affect real interest
- 2 Problems 16 and 17 are more difficult. You may need to review the defini-
ef cal
Extra Problems Page 275 - #5, 6
5.
a.
N expected returns = 60
N variance of returns = 60
(N2 N)/2 covariances = 1,770
sum = 1,890
b.
N alphas = 60
N Betas = 60
N firm specific variances = 60
Market risk premium = 1
Market variance = 1
Sum = 182
6.
A = .34
RFS Advance Access published December 21, 2013
Opaque Trading, Disclosure, and Asset
Prices: Implications for Hedge Fund
Regulation
David Easley
Department of Economics, Cornell University
Maureen OHara
Johnson Graduate School of Management, Cornell Unive
Subjective Probability and Expected Utility without Additivity
Author(s): David Schmeidler
Source: Econometrica, Vol. 57, No. 3 (May, 1989), pp. 571-587
Published by: The Econometric Society
Stable URL: http:/www.jstor.org/stable/1911053
Accessed: 03-06-2
1
Lecture 5 - The Market for Foreign Exchange
Foreign Exchange Market Every three years, the Bank for International
Settlements, the BIS, does a major survey of the foreign exchange markets. In the
latest survey, the BIS estimates that the average turnove
J SUMMARY OUTPUT: TOYOTA
Regression Statistics
Multiple R 0.436597
R Square 0.190617
Adjusted R Square 0.176662
Standard Error 5.970735
I Observations 60
ANOVA
_._
df SS MS F Signicance F
Regression 1 486956352 486956352 13.659490 0.000488
Residual 58 2
Ultimately, it is true that real assets do determine the material well heingof an
economy. Nevertheless, individuals can benet when nancial engineering creates
new products that allow them to manage their portfolios of nancial assetsniore
efciently. Becau
5. True. Under the expectations hypothesis, there are no risk premia built into bond
prices. The only reason for longterm yields to exceed ' '
. . short-term elds
expectation of higher short-term rates in the iture. YI IS an
Uncertain. Lower ination usual
CHAPTER 14: OPTIONS MARKETS
1. c is false. This is the description of the payoff to a put, not a call.
2. c is the only correct statement.
3. Each contract is for 100 shares: $7.25 x 100 = $725
Cost Paxoff Prot
Call option, X = 85 3.82 5.00 1.18
Put optio
CHAPTER 8: EFFICIENT MARKETS
AND THE BEHAVIORAL CRITIQUE
The assumptions consistent with efcient markets are (a) and (c). Many
independent, prot-maximizing participants [statement (a)] leads to efcient
markets. Statement (c) is a consequence of the fact t
Sustainable Development Final
12/18/2013
Before the Midterm
Basics: Lectures 1-5
Deductive method: start with assumed axioms to reach deduced
conclusions if a then b then c
Inductive method: find truths from reality rather than assumptions.
Learning fro
Financial Economics
Due: Tuesday, March 3, 2015
Problem Set 5
1. The standard size of a gold futures contract trading on the Chicago Mercantile Exchange is
100 troy ounces. Prices are quoted as dollars and cents per troy ounce and the contract calls
for p
Econometrica, Vol. 73, No. 6 (November, 2005), 18491892
A SMOOTH MODEL OF DECISION MAKING UNDER AMBIGUITY
BY PETER KLIBANOFF, MASSIMO MARINACCI, AND SUJOY MUKERJI1
We propose and characterize a model of preferences over acts such that the decision
maker p