Finance Theories: Black-scholes, Capital Asset Pricing Model, Black Model, Modern Portfolio Theory, Rational Pricing

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General Books LLC, 2010 - Business & Economics - 64 pages
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Please note that the content of this book primarily consists of articles available from Wikipedia or other free sources online. Pages: 63. Chapters: Black-Scholes, Capital asset pricing model, Black model, Modern portfolio theory, Rational pricing, Brownian model of financial markets, Binomial options pricing model, Post-modern portfolio theory, Value investing, Equity premium puzzle, Arbitrage pricing theory, Strategic Sustainable Investing, T-Model, Prospect theory, CAN SLIM, Put-call parity, Hull-White model, Random walk hypothesis, Annuity, Arrow-Debreu model, Modified Dietz Method, Gordon model, Vasicek model, True time-weighted rate of return, Alpha, Chepakovich valuation model, Alternative beta, Cumulative prospect theory, Chen model, Trinomial tree, Num raire, Decoy effect, Cox-Ingersoll-Ross model, Undervalued stock, Fama-French three-factor model, Adaptive market hypothesis, Earnings response coefficient, The Dogs of the Dow, Forward measure, BIfFI, Guidotti-Greenspan rule, International Fisher effect, Portfolio dedication, Magic Formula Investing, Simple Dietz Method, Rendleman-Bartter model, Efficient Frontier, Martingale pricing, Ho-Lee model, Intertemporal CAPM, Fama-MacBeth regression, Market exposure. Excerpt: Modern portfolio theory (MPT) is a theory of investment which attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets. Although MPT is widely used in practice in the financial industry and several of its creators won a Nobel memorial prize for the theory, in recent years the basic assumptions of MPT have been widely challenged by fields such as behavioral economics. MPT is a mathematical formulation of the concept of diversification in investing, with the aim of selecting a collection of investment assets that has collectively lower risk than any individual asset. That this is possible can ...

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