Financial Exam Help 123

Month: March 2014

  • Dollar Duration and Dollar Beta

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    by

    Bill Campbell
    in

    Dollar duration (or money duration) is a phrase that should be familiar to you by now: instead of measuring the percentage change in the value of a fixed income portfolio for a 1% change in yield to maturity (as modified or effective duration do), dollar duration measures the change in dollar (or other currency) value…

  • Getting from Here to There

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    by

    Bill Campbell
    in

    Many applications of derivatives – forwards and futures in particular – in risk management boil down to getting from here to there: temporarily changing (adjusting) the: Value of an equity portfolio Beta of an equity portfolio Value of a fixed income portfolio Duration of a fixed income portfolio Allocation of an equity/fixed income portfolio There are formulae…

  • Grinold-Kroner Model

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    by

    Bill Campbell
    in

    The Grinold-Kroner model is an equation to estimate the return on a stock; although the components of the model are reasonable (once you think of them), they will require a bit of memorization at first, until you’ve worked with the model a bit and it’s become habitual.  Here it is: \[\hat R_i\ =\ \frac{D_1}{P_0}\ +\…

  • Cobb-Douglas Production Function

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    by

    Bill Campbell
    in

    The Cobb-Douglas production function is: \[Y\ =\ AK^{\alpha}L^{\beta}\] where: \(Y\): total real economic output (GDP) \(A\): total factor productivity (TFP), a measure of the level of technology \(K\): capital \(L\): labor \(\alpha\): the share of total output attributable to capital, known as the output elasticity of capital; note that \(0\ <\ \alpha\ <\ 1\) \(\beta\):…

  • Endogenous Growth Theory

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    by

    Bill Campbell
    in

    There are four articles on economic growth theories: Synopsis Classical growth theory Neoclassical growth theory Endogenous growth theory (you are here) Endogenous Growth Unlike the exogenous growth theories (classical growth and neoclassical growth), endogenous growth theory views technological advancement as a result of investment in physical capital and human capital (as opposed to an external…

  • Neoclassical Growth Theory

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    by

    Bill Campbell
    in

    There are four articles on economic growth theories: Synopsis Classical growth theory Neoclassical growth theory (you are here) Endogenous growth theory Neoclassical Growth Neoclassical growth theory is more complicated than classical growth theory, but it’s not too bad. (OK, maybe it is; I’m just trying to encourage you to keep reading.)  It does require a…

  • Classical Growth Theory

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    by

    Bill Campbell
    in

    There are four articles on economic growth theories: Synopsis Classical growth theory (you are here) Neoclassical growth theory Endogenous growth theory Classical Growth Theory Classical growth theory is pretty easy (and a bit depressing); the basic idea, in a nutshell, is that when wages rise above the subsistence level (the minimum amount people need to…

  • Economic Growth Theories (Synopsis)

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    by

    Bill Campbell
    in

    There are a number of theories that attempt to explain the growth of an economy; they fit broadly into two categories: Exogenous: economic growth is caused by factors that are external to the economy itself (the prefix exo- meaning outside) Endogenous: economic growth is caused by factors that are internal to the economy itself (the…