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