Economics
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Financial economics
Finance theories
Portfolio theories
Frog study suggests context matters when choosing a mate
The presence of a third option acts as a "decoy effect," inspiring a female frog to consistently select the less attractive of the two original options.
Asset Pricing lecture 7 -The Fama_French 3 Factor Model
In finance, the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified por...
Portfolio theories
Frog study suggests context matters when choosing a mate
The presence of a third option acts as a "decoy effect," inspiring a female frog to consistently select the less attractive of the two original options.
LIBOR market model
The LIBOR market model, also known as the BGM Model (Brace Gatarek Musiela Model, in reference to the names of some of the inventors) is a financial model of interest rates. It is used for pricing int...
Korn–Kreer–Lenssen model
The Korn–Kreer–Lenssen model (KKL model) is a discrete trinomial model proposed in 1998 by Ralf Korn, Markus Kreer and Mark Lenssen to model illiquid securities and to value financial derivatives on t...
Arrow–Debreu model
In mathematical economics, the Arrow–Debreu model suggests that under certain economic assumptions (convex preferences, perfect competition, and demand independence) there must be a set of prices such...
Put–call parity
In financial mathematics, put–call parity defines a relationship between the price of a European call option and European put option, both with the identical strike price and expiry, namely that a por...
Uncertainty
Uncertainty is a term used in subtly different ways in a number of fields, including philosophy, physics, statistics, economics, finance, insurance, psychology, sociology, engineering, and information...
Rational pricing
Rational pricing is the assumption in financial economics that asset prices (and hence asset pricing models) will reflect the arbitrage-free price of the asset as any deviation from this price will be...
Roy's safety-first criterion
Roy's safety-first criterion is a risk management technique that allows an investor to select one portfolio rather than another based on the criterion that the probability of the portfolio's return fa...
Status quo bias
Status quo bias is a cognitive bias; a preference for the current state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived a...
Short-rate model
A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usu...
Alpha (investment)
Alpha is a risk-adjusted measure of the so-called active return on an investment. It is the return in excess of the compensation for the risk borne, and thus commonly used to assess active managers' p...
Cox–Ingersoll–Ross model
In mathematical finance, the Cox–Ingersoll–Ross model (or CIR model) describes the evolution of interest rates. It is a type of "one factor model" (short rate model) as it describes intere...
Vasicek model
In finance, the Vasicek model is a mathematical model describing the evolution of interest rates. It is a type of "one-factor model" (more precisely, one factor short rate model) as it describes inter...
Chepakovich valuation model
The Chepakovich valuation model uses the discounted cash flow valuation approach. It was first developed by Alexander Chepakovich in 2000 and perfected in subsequent years. The model was originally de...
The Dogs of the Dow
The Dogs of the Dow is an investment strategy popularized by Michael B. O'Higgins, in 1991 which proposes that an investor annually select for investment the ten Dow Jones Industrial Average stocks wh...
Intertemporal CAPM
The Intertemporal Capital Asset Pricing Model, or ICAPM, was an alternative to the CAPM provided by Robert Merton. It is a linear factor model with wealth and state variable that forecast changes in ...
Decoy effect
In marketing, the decoy effect (or asymmetric dominance effect) is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a thi...
Modern portfolio theory
Modern portfolio theory (MPT) is a theory of finance that attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expect...
Behavioral economics
Behavioral economics and the related field, behavioral finance, study the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions a...
Simple Dietz method
The simple Dietz method is a means of measuring historical investment portfolio performance, compensating for external flows into/out of the portfolio during the period. The formula for the simple Die...
Loss aversion
In economics and decision theory, loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Most studies suggest that losses are twice as powerful, psychological...
Framing (social sciences)
In the social sciences, framing comprises a set of concepts and theoretical perspectives on how individuals, groups, and societies organize, perceive, and communicate about reality. Framing involves t...
Dividend discount model
The dividend discount model (DDM) is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their pr...
Random walk hypothesis
The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and thus cannot be predicted. It is consistent with the efficient-market hypothesis....
CAN SLIM
CAN SLIM refers to the seven-pronged mnemonic publicized by the American newspaper Investor's Business Daily, which claims to be a checklist of the characteristics performing stocks tend to share befo...
Equity premium puzzle
The equity premium puzzle refers to the phenomenon that observed returns on stocks over the past century are a few percent higher than returns on government bonds. It is a term coined by Rajnish Mehra...
Prospect theory
Prospect theory is a behavioral economic theory that describes the way people choose between probabilistic alternatives that involve risk, where the probabilities of outcomes are known. The theory sta...