Quantitative Methods for Finance and InvestmentsQuantitative Methods for Finance and Investments ensures that readers come away from reading it with a reasonable degree of comfort and proficiency in applying elementary mathematics to several types of financial analysis. All of the methodology in this book is geared toward the development, implementation, and analysis of financial models to solve financial problems. |
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Contents
1 | |
2 | |
3 | |
14 TIME VALUE RISK ARBITRAGE AND PRICING | 5 |
15 THE ORGANIZATION OF THIS BOOK | 6 |
FUNCTIONS AND OPERATIONS | 7 |
23 EXPONENTS | 8 |
INTEREST AND FUTURE VALUE A more complete presentation of this material is provided in chapter 4 | 9 |
C H A P T E R S I X ELEMENTARY PORTFOLIO MATHEMATICS | 103 |
sections 29 57510 and 62 | 104 |
64 DIVERSIFICATION AND EFFICIENCY | 106 |
65 THE MARKET PORTFOLIO AND BETA | 110 |
section 63 | 111 |
EXERCISES | 113 |
C H A P T E R S E V E N ELEMENTS OF MATRIX MATHEMATICS | 115 |
PORTFOLIO MATHEMATICS Background reading sections 29 62 63 and 71 | 116 |
24 THE ORDER OF ARITHMETIC OPERATIONS AND THE RULES OF ALGEBRA | 10 |
INITIAL DEPOSIT AMOUNTS A more complete presentation of this material is provided in chapter 4 | 11 |
sections 22 and 25 | 12 |
THE TIME NEEDED TO DOUBLE YOUR MONEY You may also wish to read related material in chapter 4 | 13 |
27 SUBSCRIPTS | 14 |
MEAN VALUES You may also wish to read related material in section 51 | 15 |
section 28 | 16 |
section 28 | 17 |
THE TERM STRUCTURE OF INTEREST RATES Background reading application 25 | 18 |
section 210 | 19 |
section 211 | 20 |
EXERCISES | 21 |
APPENDIX 2A AN INTRODUCTION TO THE EXCEL SPREADSHEET | 23 |
ALGEBRA AND SOLVING EQUATIONS | 25 |
PURCHASE POWER PARITY | 27 |
FINDING BREAKEVEN PRODUCTION LEVELS | 28 |
SOLVING FOR SPOT AND FORWARD INTEREST RATES Background reading sections 13 and 210 and application 26 | 29 |
FINDING BREAKEVEN PRODUCTION LEVELS Background reading application 32 | 30 |
FINDING THE PERFECTLY HEDGED PORTFOLIO | 31 |
section 31 | 32 |
PRICING FACTORS | 35 |
section 31 | 38 |
MONEY MULTIPLIERS | 40 |
section 23 | 41 |
UTILITY OF WEALTH | 43 |
EXERCISES | 44 |
section 33 and appendix 2A | 48 |
C H A P T E R F O U R THE TIME VALUE OF MONEY | 51 |
sections 27 31 and 42 | 52 |
44 FRACTIONAL PERIOD COMPOUNDING OF INTEREST | 53 |
APY AND BANK ACCOUNT COMPARISONS | 55 |
sections 25 and 44 | 56 |
sections 28 34 and 43 | 57 |
PLANNING FOR RETIREMENT Background reading sections 25 31 and 45 | 59 |
section 43 | 60 |
Deriving the presentvalue formula | 61 |
sections 34 46 and 48 | 62 |
Deriving the presentvalue annuity formula | 63 |
PLANNING FOR RETIREMENT PART II Background reading application 42 and section 49 | 64 |
section 49 | 65 |
DETERMINING THE MORTGAGE PAYMENT | 66 |
section 49 | 67 |
sections 49 and 411 | 68 |
STOCK VALUATION MODELS | 70 |
section 412 | 72 |
EXERCISES | 73 |
APPENDIX 4A TIME VALUE SPREADSHEET APPLICATIONS | 77 |
C H A P T E R F I V E RETURN RISK AND COMOVEMENT | 79 |
FUND PERFORMANCE Background reading sections 28 and 51 and application 24 | 81 |
sections 210 and 51 and application 25 | 82 |
FUND PERFORMANCE PART II Background reading section 52 and application 51 | 83 |
sections 47 48 and 49 | 84 |
54 BOND YIELDS | 87 |
55 AN INTRODUCTION TO RISK | 88 |
57 VARIANCE AND STANDARD DEVIATION | 89 |
58 HISTORICAL VARIANCE AND STANDARD DEVIATION | 91 |
59 COVARIANCE | 93 |
510 THE COEFFICIENT OF CORRELATION AND THE COEFFICIENT OF DETERMINATION | 94 |
EXERCISES | 95 |
APPENDIX 5A RETURN AND RISK SPREADSHEET APPLICATIONS | 99 |
sections 29 and 71 | 117 |
PORTFOLIO MATHEMATICS PART II Background reading application 71 and section 72 | 120 |
PUTCALL PARITY Background reading section 72 | 121 |
sections 33 and 72 | 123 |
sections 13 33 and 73 | 125 |
EXTERNAL FUNDING REQUIREMENTS Background reading section 75 and application 37 | 126 |
COUPON BONDS AND DERIVING YIELD CURVES Background reading sections 48 49 and 74 and applications 26 and 44 | 127 |
ARBITRAGE WITH RISKLESS BONDS Background reading application 75 | 130 |
FIXED INCOME PORTFOLIO DEDICATION Background reading application 76 | 131 |
BINOMIAL OPTION PRICING Background reading section 74 and application 73 | 132 |
sections 73 and 74 | 133 |
USING OPTIONS TO SPAN THE STATE SPACE Background reading section 75 and application 78 | 136 |
EXERCISES | 137 |
sections 73 74 and 75 and appendix 3A | 142 |
C H A P T E R E I G H T DIFFERENTIAL CALCULUS | 145 |
THE NATURAL LOG Background reading sections 25 211 44 45 and 81 and application 27 | 146 |
section 81 | 147 |
section 82 | 149 |
MARGINAL UTILITY Background reading section 83 and application 39 | 151 |
DURATION AND IMMUNIZATION Background reading sections 48 49 54 and 83 and application 44 | 153 |
PORTFOLIO RISK AND DIVERSIFICATION Background reading sections 61 64 65 and 82 | 156 |
section 83 | 157 |
sections 83 and 84 | 158 |
PLOTTING THE CAPITAL MARKET LINE Background reading sections 64 74 and 85 | 159 |
sections 25 26 81 and 82 | 165 |
sections 211 and 83 | 166 |
CONVEXITY AND IMMUNIZATION Background reading section 87 and application 84 | 167 |
sections 74 and 84 | 168 |
OPTIMAL PORTFOLIO SELECTION Background reading sections 63 64 and 87 | 170 |
EXERCISES | 172 |
sections 212 and 83 | 176 |
section 88 application 88 and appendix 7C | 178 |
C H A P T E R N I N E INTEGRAL CALCULUS | 180 |
section 91 | 181 |
sections 91 and 92 | 185 |
CUMULATIVE DENSITIES Background reading sections 24 and 93 | 186 |
EXPECTED VALUE AND VARIANCE Background reading sections 56 57 and 92 and application 91 | 188 |
VALUING CONTINUOUS DIVIDEND PAYMENTS Background reading sections 45 48 92 and 93 | 189 |
EXPECTED OPTION VALUES Background reading section 93 and application 78 | 191 |
SECURITY RETURNS IN CONTINUOUS TIME Background reading section 94 and application 93 | 193 |
ANNUITIES AND GROWING ANNUITIES Background reading section 94 and application 95 | 194 |
EXERCISES | 195 |
APPENDIX 9A RULES FOR FINDING INTEGRALS | 198 |
section 92 | 199 |
C H A P T E R T E N ELEMENTS OF OPTIONS MATHEMATICS | 203 |
ONE TIME PERIOD Background reading section 101 and application 78 | 205 |
MULTIPLE TIME PERIODS Background reading section 102 | 207 |
section 103 | 210 |
sections 101 and 104 and application 79 | 212 |
sections 84 85 and 104 | 213 |
sections 86 and 106 | 215 |
EXERCISES | 219 |
REFERENCES | 222 |
A P P E N D I X A SOLUTIONS TO EXERCISES | 224 |
A P P E N D I X B THE ZTABLE | 266 |
A P P E N D I X C NOTATION | 267 |
A P P E N D I X D GLOSSARY | 270 |
274 | |
Other editions - View all
Quantitative Methods for Finance and Investments John L. Teall,Iftekhar Hasan No preview available - 2002 |
Quantitative Methods for Finance and Investments John Teall,Iftekhar Hasan No preview available - 2009 |
Quantitative Methods for Finance and Investments John Teall,Iftekhar Hasan No preview available - 2002 |
Common terms and phrases
annuity antiderivative application approximation arbitrage arithmetic mean assume Background reading Black–Scholes bond call option cash flows chapter combination Company stock compounded computed Consider correlation coefficient coupon covariance currently selling curve determined as follows deviation of returns differential equation discount rate dividends dy/dx equal example exercise price expected return expected value expiration exponents finance ﬁnd firm’s ﬁrst formula fund future value geometric expansion geometric mean given identity matrix increase integral interest payments interest rate inverse inverse matrix investment investor linear loan market portfolio mathematics matrix multiply obtain one-year payoff vectors period portfolio return portfolio risk potential present value purchase put–call parity rate of return represents return outcomes Riemann sums riskless return rate security returns Solve the following spot rate spreadsheet standard deviation stock price tion underlying stock variable yield to maturity zero σ σ