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Physical Sciences and Mathematics Commons™
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- Calculus (2)
- Finance options (2)
- Integral calculus (2)
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- Altman Z-score (1)
- Bias correction (1)
- CEO wealth effect (1)
- Capital budgeting (1)
- Capital market line (1)
- Discounted payback period (1)
- Efficient frontier (1)
- Estimation adjustments (1)
- European-style options pricing (1)
- Firm riskiness (1)
- Futures (1)
- IRR (1)
- Internal rate of return (1)
- Monte Carlo simulation (1)
- Multiple sales growth rates (1)
- NPV (1)
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- Payback period (1)
- Portfolio analysis (1)
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- Regression analysis (1)
- Set mathematics (1)
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- Two-asset portfolios (1)
- Unbalanced panel data analysis (1)
Articles 1 - 8 of 8
Full-Text Articles in Physical Sciences and Mathematics
How Ceo Wealth Affects The Riskiness Of A Firm, Sonik Mandal, Charlie Swartz, Sanjib Guha, Carl B. Mcgowan Jr.
How Ceo Wealth Affects The Riskiness Of A Firm, Sonik Mandal, Charlie Swartz, Sanjib Guha, Carl B. Mcgowan Jr.
Finance Faculty Publications
The objective of this paper is to analyze the relationship between the ownership level of managers and the risk averse behavior of the firm. We measure the ownership level of the managers by the ratio of their ownership of the company relative to their total wealth for a sample of 69 individuals from the Forbes 400 list of the wealthiest individuals in the world for the period from 2001-11 using an unbalanced panel data analysis. The dependent variable is the Altman Z-score of each firm and we further test these relationships using financial leverage. The independent variables are delta and …
Adding Depth To The Discussion Of Capital Budgeting Techniques, Tom Arnold, Terry D. Nixon
Adding Depth To The Discussion Of Capital Budgeting Techniques, Tom Arnold, Terry D. Nixon
Finance Faculty Publications
The subject of capital budgeting generally encompasses a significant percentage of any beginning finance course with net present value (NPV) often receiving the most attention. Even after this substantial time allotment, critical assumptions and comparisons of the different techniques (such as payback period, discounted payback period, NPV and IRR) are frequently glossed over due to time constraints. Consequently, the goal of this paper is to present these non-NPV techniques in a manner that allows the beginning finance student to expeditiously see the intuition, inherent assumptions, and any connection with the more popular NPV calculation. A small portion of this paper …
Getting More Out Of Two Asset Portfolios, Tom Arnold, Terry D. Nixon
Getting More Out Of Two Asset Portfolios, Tom Arnold, Terry D. Nixon
Finance Faculty Publications
Two-asset portfolio mathematics is a fixture in many introductory finance and investment courses. However, the actual development of the efficient frontier and capital market line are generally left to a heuristic discussion with diagrams. In this article, the mathematics for calculating these attributes of two-asset portfolios are introduced in a framework intended for the undergraduate classroom.
Improving Pro Forma Analysis Through Better Terminal Value Estimates, Tom Arnold, David S. North, Roy A. Wiggins
Improving Pro Forma Analysis Through Better Terminal Value Estimates, Tom Arnold, David S. North, Roy A. Wiggins
Finance Faculty Publications
Basic pro forma analysis often estimates the terminal value input using a simple growing perpetuity assumption. While this assumption is easy to implement, it potentially creates an upward bias in some inputs leading to lower firm or project value outputs. The purpose of this paper is to demonstrate a more accurate way to estimate the terminal value input. Further, by allowing for multiple sales growth rates and by not restricting other input variables to necessarily grow at these same rates, a more accurate, flexible, compact, and thorough analysis is possible.
An Excel Application For Valuing European Options With Monte Carlo Analysis, Tom Arnold, Stephen C. Henry
An Excel Application For Valuing European Options With Monte Carlo Analysis, Tom Arnold, Stephen C. Henry
Finance Faculty Publications
By developing the basic intuition of how Monte Carlo simulation works within an Excel spreadsheet framework, this paper allows the undergraduate student to use Monte Carlo simulation techniques to price European style options without additional sophisticated software. Further, the skills and intuition developed provide the basis for much more complex simulation techniques.
Intuitive Black-Scholes Option Pricing With A Simple Table, Tom Arnold, Terry D. Nixon, Richard L. Shockley Jr.
Intuitive Black-Scholes Option Pricing With A Simple Table, Tom Arnold, Terry D. Nixon, Richard L. Shockley Jr.
Finance Faculty Publications
The Black-Scholes option pricing model (1973) can be intimidating for the novice. By rearranging and combining some of the variables, one can reduce the number of parameters in the valuation problem from five to two: 1) the option's moneyness ratio and 2) its time-adjusted volatility. This allows the computationally complex Black-Scholes formula to be collapsed into an easy-to-use table similar to those in some popular textbooks. The tabular approach provides an excellent tool for building intuition about the comparative statics in the Black-Scholes equation. Further, the pricing table can be used to price options on dividend-paying stocks, commodities, foreign exchange …
Visualizing The Stochastic Calculus Of Option Pricing With Excel And Vba, Tom Arnold, Stephen C. Henry
Visualizing The Stochastic Calculus Of Option Pricing With Excel And Vba, Tom Arnold, Stephen C. Henry
Finance Faculty Publications
Stochastic calculus, part calculus and part statistics, is an integral part of option pricing that can be intimidating. By developing the statistical nature of stochastic processes and introducing Monte Carlo simulation using Microsoft Excel, this paper develops a visualization of how stochastic processes are evaluated using Ito's lemma and integral calculus. Ultimately, the Black-Scholes (1973) option pricing equation is the natural result.
Advanced Portfolio Theory: Why Understanding The Math Matters, Tom Arnold
Advanced Portfolio Theory: Why Understanding The Math Matters, Tom Arnold
Finance Faculty Publications
The goal of this paper is to motivate the use of efficient set mathematics for portfolio analysis [as seen in Roll, 1977] in the classroom. Many treatments stop at the two asset portfolio case (avoiding the use of matrix algebra) and an alarming number of treatments rely on illustration and templates to provide a heuristic sense of the material without really teaching how efficient portfolios are generated. This is problematic considering that the benefits of understanding efficient set mathematics go beyond portfolio analysis and into such topics as regression analysis (as demonstrated here).