Questions tagged [theory]
The theory tag has no usage guidance.
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Statistically, which occupation will earn $1 million first [closed]
I feel like most people have heard some version of the story where there are two people who take different career paths-- one leaves highschool to become a doctor, goes through 10 years of intense ...
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Personnel costs recorded twice in the income statement? [closed]
We are talking about a company that produces its own products. Since the manufacturing costs also include part of the personnel costs, the personnel costs are recorded twice in the income statement. ...
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Formula like Kelly criterion for choosing how much of an investment to liquidate?
I made a few investments, and surprise, surprise, a few of them shot up in value. Now I'm faced with the dilemma of the greedy: do I sell now and capitalize on existing profits, or do I wait, risking ...
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What's the implication of index fund dividend yields outperforming the 30-yr treasury?
On a year-on-year basis, dividend yields of index funds are greater than even the 30-year treasury coupons; the spread is even more pronounced on shorter-dated treasuries. For instance, a year's worth ...
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3
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If I really did owe the bank a billion dollars, what would happen? [closed]
There's a saying that goes like "If you owe the bank $100 dollars, that's your problem; if you owe the bank $100 million, that's the bank's problem."
Let's adjust for inflation and say that I owe the ...
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Theoretical gain of a one month investment [closed]
Say you get a million dollars on your account through a mistake by the bank and they don't realise it for a month: how much could you make from clever investing the money before they charge it back a ...
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When investing, is the risk/reward tradeoff linear?
Rule 1 of investing is that the more risk you're willing to take, the higher your potential for reward. Bonds are low-risk and come with maybe 1-2% returns, stocks much higher risk and maybe 5-15% ...
- 1,375
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Diversification reduces risk, but does this base on the assumption that expected return of each asset is always in proportion to its risk?
College teachers showed that diversification is free lunch for getting rid of part of the risk, but does this argument based on the assumption that expected return of each asset is always in ...
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Is the stock market a zero-sum game?
In the stock market, over both the short and long-term, does someone necessary need to lose in order for someone else to make a profit? If not, then more fundamentally does something — in the most ...
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2
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1
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A question on Random Walk Hypothesis [closed]
If random walk hypothesis is true wouldn't that imply that bear and bull markets, the internet boom and dot-com bubble, the Great Recession, the Great Depression, etc were the results of random ...
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Market Relativity Theory?
Would it be fair to assume this:
High market-cap securities will usually perform influenced to some extent by the market/Index fund they are currently traded on.
For example; the Turkish Borsa ...
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Could one person with a card with no spending limit pay off everyone's debt? [closed]
In the season 13 South Park episode Margaritaville, Kyle uses a Platinum American Express card with no spending limit to pay off everyone else's personal debt so they're free to spend again, thus ...
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3
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How is the Efficient Frontier drawn?
I know efficient frontier is the collection of expected return on a portfolio and the level of risk(e.g. standard deviation). What I don't understand is that is the efficient frontier really drawn ...
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2
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Understanding the concepts of market maker and broker
Wikipedia says:
A market maker is a company, or an individual, that quotes both a buy
and a sell price in a financial instrument or commodity held in
inventory, hoping to make a profit on the ...
- 5,873
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3
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Who creates money? Central banks or commercial banks? [closed]
Which of these is a better description of money creation:
Scenario 1: Central bank creates money
Customer A deposits $10 at his bank. Customer B wants to borrow $100. The bank is in good standing ...
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1
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1
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Deriving the put-call parity
I am looking at the proof of the put-call parity, $P+S=C+Ee^{-rT}$
The proof begins by defining two portfolios with same strike price $E$ and time to expiry $T$:
1. A call $C(E,T)$ plus cash $Ee^{-rT}...
dplanet
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Option Theta: What conditions are needed for Theta > P/N, where P = option price, and N = days to expiration?
The wikipedia definition for Theta is:
And people frequently refer to the picture below, to show what typically happens with an option's value as a function of time; we can note this is non-...
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Why is a stock that pays a dividend preferrable to one that doesn't?
I understand that a dividend is a way for a company to return money to shareholders. But I'm not quite understanding why it is preferable to capital appreciation and putting the money to work ...
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