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Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange, 2nd Edition
By: Keith Cuthbertson , Dirk NitzscheeBook Publisher: John Wiley & Sons
Imprint: John Wiley & Sons, Ltd.
Format: Adobe Encrypted (DRM)
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This new edition of the hugely successful Quantitative Financial Economics has been revised and updated to reflect the most recent theoretical and econometric/empirical advances in the financial markets. It provides an introduction to models of economic behaviour in financial markets, focusing on discrete time series analysis. Emphasis is placed on theory, testing and explaining ‘real-world’ issues.
The new edition will include: Updated charts and cases studies. New companion website allowing students to put theory into practice and to test their knowledge through questions and answers. Chapters on Monte Carlo simulation, bootstrapping and market microstructure.
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| Title of Business & Economics eBook: Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange, 2nd Edition | |
| Release Date: 07-05-2005 | |
| Publisher: John Wiley & Sons, Ltd. |
This eBook download is available in the following formats:
| Parent title | Quantitative Financial Economics:... |
|---|---|
| Encrypted (DRM) | Yes |
| SKU | 9780470091722 |
| File size | 5592 |
| Security | n/a |
| Printing | Not allowed |
| Copying | Not allowed |
| Read aloud | No Sys requirements Download reader |
| Devices | Samsung Tablet, Apple Ipad & Iphone, Barnes & Noble Nook, Kobo eReader, Aluratek Libre, Iliad, Nokia, Blackberry, Hanlin |
| Note | Excellent navigation features are available via Adobe such as bookmarks and a quick access table of contents. Text search is easily accessible. An Adobe DRM-protected file is different than a pdf file in that it uses Adobe DRM (Digital Rights Management) technology, which authors and publishers use to protect their content from illegal online distribution and to set certain privileges such as restrictions on copying and printing. |
Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange, 2nd Edition
Chapter One
BASIC CONCEPTS IN FINANCE
Aims
To consider different methods of measuring returns for pure discount bonds, coupon-paying bonds and stocks.
Use discounted present value techniques, DPV, to price assets.
Show how utility functions can be used to incorporate risk aversion, and derive asset demand functions from one-period utility maximisation.
Illustrate the optimal level of physical investment and consumption for a two-period horizon problem.
The aim of this chapter is to quickly run through some of the basic tools of analysis used in finance literature. The topics covered are not exhaustive and they are discussed at a fairly intuitive level.
1.1 Returns on Stocks, Bonds and Real Assets
Much of the theoretical work in finance is conducted in terms of compound rates of return or interest rates, even though rates quoted in the market use 'simple interest'. For example, an interest rate of 5 percent payable every six months will be quoted as a simple interest rate of 10 percent per annum in the market. However, if an investor rolled over two six-month bills and the interest rate remained constant, he could actually earn a 'compound' or 'true' or 'effective' annual rate of [(1.05).sup.2] = 1.1025 or 10.25 percent. The effective annual rate of return exceeds the simple rate because in the former case the investor earns 'interest-on-interest'.
We now examine how we calculate the terminal value of an investment when the frequency with which interest rates are compounded alters. Clearly, a quoted interest rate of 10 percent per annum when interest is calcula
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