14
votes
Accepted
How exactly are corporate bonds priced at issue
I am not an investment banker, but usually the procedure is something like this:
(0) The IB knows the yield of existing bonds with the same maturity and credit rating, so it is not too difficult for ...
- 9,332
6
votes
Accepted
Invested Capital: operating approach vs financing approach
Because ROIC is not part of of the official accounting standards such as US-GAAP or IFRS, its definition may vary, also depending a bit on how the party defining it is planning to use it and the ...
- 1,026
5
votes
Accepted
IPO Valuation: Share Pricing and Number of Shares
IPO valuation is super sophisticated. There is usually a Managing Underwriter, who has a team of analysts/asset pricers/investment bankers/lawyers/etc. with complicated terms and they go and value a ...
- 460
4
votes
How exactly are corporate bonds priced at issue
In addition to @AlexC answer there are 2 additional key points.
1) if the issue is oversubscribed the IB / syndicate team will choose the allocation to each client usually based on their relative ...
- 9,215
4
votes
Accepted
How much market data is required to confidently predict the yearly returns of a stock?
It seems implicit in the question that you are happy to assume that the distribution of historical returns is an unbiased and consistent estimator of the distribution of future returns. Else "it ...
- 5,041
3
votes
How to calculate performance of a private equity investment?
I am not an expert on GIPS, with its many pages of rules, but I do remember that under GIPS Private Equity results are to be given in terms of IRR (Internal Rate of Return). In most other cases (stock/...
- 9,332
3
votes
Accepted
Why are changes in stock market wealth considered permanent?
I guess the concept you're looking for are martingales. These are stochastic processes which remain on their current level (in expectation!).
Ignoring some technical conditions, a stochastic process $...
- 15.3k
3
votes
Accepted
How to (efficiently) calculate the maximum possible return of a perfect "crystal ball" investment strategy?
This answer seems to be wrong. Please read the edit and the comments.
To me, that smelled like dynamic programming too. After implementing a dynamic programming solution according to http://www.cs.rpi....
- 146
3
votes
Accepted
Calculate interest
You can't derive a formula from this equation to calculate $q$ (or $i$) directly for all values of $n$ given the other variables.
However, you can use the RATE() function in Excel (or a similar ...
- 1,026
3
votes
How to incorporate ESG in Portfolio Optimization?
recall that, in general, you have the following elements:
A universe of possible stocks. There are tens of thousands of possible investments out there, so you apply screens to limit your universe to ...
- 12k
3
votes
Two specific questions about CAPM's assumptions and implications
If the two companies have indeed the same beta, then company A will have more total risk. Or in other words company A has more idiosyncratic risk (i.e. the risk that is not explained by the model);
...
- 8,062
2
votes
Accepted
ABS vs covered bonds vs CDO
MBS are securities which represent ownership in a pool of mortgages
ABS are securities which represent ownership in a pool of assets other than mortgages (for example auto loans or credit card loans)
...
- 9,332
2
votes
PPPN: participation rate, stocks and premium
In general, PPN is the short form for principal protected notes. Here, the principal, or notional, $N$ is generally return in full. I am a little confused why only 80 % is returned. It may be a ...
- 21k
2
votes
Accepted
Multi-year annualized Sharpe Ratio
You have to annualize the monthly avg return also:
=(12*AVERAGE(G3:G145)-0.015)/(STDEV(G3:G145)*Sqrt(12))
- 9,332
2
votes
A citizen's life as an investment project (from the State's PoV)
I do not think such figure exist in its per-canned form. However, for the most part, any pension/social security/annuity provider needs to have an idea of that, since it is their current and future ...
- 193
2
votes
Buy side techniques
The classic text for machine learning is 'The Elements of Statistical Learning' by Tibshirani et al. I believe the term "data mining" is often used synonymously with "machine learning".
- 5,231
2
votes
Thoughts on how quantitative hedge funds use machine learning to invest in the stock market (algorithms, examples of data, etc.)
This may not directly answer your questions. There's a class offered by Georgia Tech called Machine Learning for Trading, you might find it useful.
https://www.udacity.com/course/machine-learning-for-...
- 313
2
votes
Choice between 2 investments that cost the same but offer different interest and face value
Why don't you calculate the IRR of each investment? (aside from all the issues with IRR).
- 238
2
votes
Accepted
Why should long-term investors care about flash crashes/ intra-daily volatility/HFT?
I agree with the implicit idea behind your question that "on the paper, high frequency fluctuations of prices should not affect long term moves".
One point is for sure: the volatility we have in mind ...
- 11.5k
2
votes
Optimizing Investment Portfolio
The scope of your question is quite unclear to me.
You seem to mention trading. If you have multiple trading strategies (that you think are good, and reasonably uncorrelated) and you want to trade ...
- 10.9k
2
votes
Optimizing Investment Portfolio
What does it mean that you will optime portfolio "without programming"? Does that mean that you will do calculations by hand???
Articles will not help you since every article you will be able find ...
- 1,627
2
votes
NPV and efficient market hypothesis
The assumption that the discount rate should be derived from the IRR of an alternative investment is not correct.
Commonly the WACC of the company (or the WACC of the funds needed for the investment ...
- 51
2
votes
Estimating realised gains given growth rate and churn
Assume we start at $t=0$ with $P_0$, there are $t=1...N$ subsequent periods, and at each period-end $t$ an (entirely arbitrary) portion $c$ of our portfolio $P_t$ is churned and $(1-c)$ remains ...
- 1,356
2
votes
What is the duration of a rolling 5 year investment?
The duration represents the sensitivity of the price of a financial instrument to current interest rates. Since at the rolling date the price will be equal to the face value no matter what happens to ...
- 33
2
votes
Open Interest on Stocks
In my opinion, your intuition that their definition is crap is correct.
Google doesn’t give me another source that uses this definition either.
- 8,438
1
vote
Accepted
Security Analysis By Benjamin Graham Example Doubt
After announcement, in December, of the intention to call the bond in April at 11 the market price fell to 11 and apparently remained at 11 throughout January.
The broker could have purchased the ...
- 9,215
1
vote
NPV and efficient market hypothesis
Note that CF1 is a weighted average of possible future outcomes, about which it is possible for different investors to have different beliefs and risk preferences.
NPV = -I + sum(p(i) * CFi1) /(1+k) ...
- 5,041
1
vote
Possible application of Polya's Urn on Portfolio's Investments?
As a Polya urn is often referred to as the rich get richer, it maybe possible to use his urn to get richer.
It is known that these urns can be related to the Dirichlet-multinomial distribution. That ...
- 11
1
vote
Comparing values of indicator between different stocks
Technical analysis is not quite in my wheelhouse, but it's been an interesting topic to me, so hopefully I can lend a hand. Let's start with some basic assumptions: Because OBV is based on volume, ...
- 121
1
vote
How did Dimson, Marsh and Staunton (2002) computed the equity index annual real return?
All of the DMS returns are adjusting for dividends. Hence dividends are accounted in the sample. Moreover, DMS have also accounted for inflation. Hence, the real total net equity index return, now and ...
- 111
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