INVESTING IN THE REAL WORLD:
PRACTICE AND THEORY
by
C. L. Mattoli
RedHill Capital Corporation
Investing In the Real World: Practice and Theory
Copyright © by Craig L. Mattoli 2004-2006
All rights reserved. No part of this monograph may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without prior express written permission from Craig L. Mattoli, Redhill Capital Corp.,
Delaware, U.S.A.: clm@clmattioli.com.
Contents:
PREFACE ..................................................................................... ERROR! BOOKMARK NOT DEFINED.
CHAPTER 1: INTRODUCTORY INVESTMENT THINKINGERROR! BOOKMARK NOT DEFINED.
1.1 INTRODCUTION TO INVESTING
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The Scope Error! Bookmark not defined.
Analytics Error! Bookmark not defined.
Legal Character
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Psychology Error! Bookmark not defined.
The Nature of the Business Error! Bookmark not defined.
What is Investing? Error! Bookmark not defined.
The Modern Approach to Finance Error! Bookmark not defined.
1.2 THE BASIC PROBLEM POSED
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Why Invest?
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Inflation as Investment Motivation Error! Bookmark not defined.
1.3 THE TIME VALUE OF MONEY: A TECHNICAL INTERLUDE
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What's it Worth? Error! Bookmark not defined.
Interest
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Future Value
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Compound versus Simple Interest
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Compounding During a Year
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Return
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The Relativity of Money
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Present Value
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Annuities Error! Bookmark not defined.
Time Value and Equations: Inside and Out Error! Bookmark not defined.
1.4 THE SEGMENTATION OF CAPITALISM
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Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments .................................................................................... Error! Bookmark not defined.
Technical Exercises ........................................................................................ Error! Bookmark not defined.
CHAPTER 2: THE CREATION OF SECURITIES AND BUSINESS ENTITIESERROR! BOOKMARK NOT
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2.1 INTRODUCTION
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2.2 ECONOMIES, SAVINGS & CAPITAL FORMATION
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Savings versus Consumption Error! Bookmark not defined.
Paper
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2.3 PRELIMINARY INVESTMENT VENUES: MONEY MARKETS AND GOVERNMENT BONDS
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Money Market
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Government Debt Error! Bookmark not defined.
Eurodollars
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Commercial Paper Error! Bookmark not defined.
Federal Agency Obligations Error! Bookmark not defined.
Inter-Bank Market Error! Bookmark not defined.
2.4 BASIC BUSINESS ORGANIZATION
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Sole Proprietorships
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Partnerships
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Corporations
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2.5 THE SECURITIZATION OF CORPORATE OBLIGATIONS ERROR! BOOKMARK NOT DEFINED.
Paper Debt Error! Bookmark not defined.
Common Stock
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Preferred Stock
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The Value of Paper Error! Bookmark not defined.
A Tale of Corporate Law
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2.6 INVESTMENT BANKS
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The Beginning of Business’ Paper Life
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Markets, Markets Error! Bookmark not defined.
The Prospectus
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Initial Public Offering
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2.7 A PRELUDE TO INVESTMENT SUPPLY ERROR! BOOKMARK NOT DEFINED.
Beyond Traditional Stocks and Bonds
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Financial Derivatives
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Art and Antiques Error! Bookmark not defined.
2.8 THE FLOW OF FUNDS: SUPPLY MEETS DEMAND
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Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments .................................................................................... Error! Bookmark not defined.
Technical Exercises ........................................................................................ Error! Bookmark not defined.
CHAPTER 3: BASIC INVESTMENT VALUATION .............. ERROR! BOOKMARK NOT DEFINED.
3.1 INTRODUCTION
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3.2 THE FUNDAMENTAL VARIABLE OF INVESTMENT THEORY
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Calculus and Change
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Continuous Compounding and the Exponential Function
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Percentage Change and the Natural Log
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The Relation of Exponentials and Logs
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Logic and Investment Analysis
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3.3 BASIC VALUATION CONSIDERATIONS
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Discount Securities Error! Bookmark not defined.
Basic Bond Valuation
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Basic Equity Value Error! Bookmark not defined.
Stock Tales Error! Bookmark not defined.
The Dividend Decision
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Ex-Dates and Other States Error! Bookmark not defined.
Which Cash Flow? Error! Bookmark not defined.
Leverage and Equity Value Error! Bookmark not defined.
What are the Rates Error! Bookmark not defined.
Who Needs Dividends: the P/E Valuation Model
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The Reality of Simple Valuation Models
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3.4 THE TERM STRUCTURE OF INTEREST RATES ERROR! BOOKMARK NOT DEFINED.
Real and Nominal Rates
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Money, Inflation and Interest Rates Error! Bookmark not defined.
Treasury Yield Curve
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Understanding Term Structure
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The Uniqueness of Zero-Coupon Bonds
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Beyond the ZCB Yield Curve Error! Bookmark not defined.
A World without ZCB’s
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Pure Expectations Error! Bookmark not defined.
The Liquidity or Risk Premium Theory
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Market Segmentations
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Term Structure: Concluding Comments
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Term Structure for Non-Zero Risk Error! Bookmark not defined.
3.5 ADVANCED VALUATION THINKING ERROR! BOOKMARK NOT DEFINED.
Multi-Period Discounting and the Internal Rate of Return Assumption Error! Bookmark not defined.
Discounted Value Inversely Related to Rate Error! Bookmark not defined.
Bond Sensitivity
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Bond Trading Profits
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Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments .................................................................................... Error! Bookmark not defined.
Technical Exercises ........................................................................................ Error! Bookmark not defined.
CHAPTER 4: SECURITIES MARKETS .................................. ERROR! BOOKMARK NOT DEFINED.
4.1 INTRODUCTION
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4.2 SECONDARY MARKETS FOR SECURITIES
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Price versus Value Error! Bookmark not defined.
What Markets Should Provide
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Main Securities Markets
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Securities Market Mechanics
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The Third Market Error! Bookmark not defined.
Electronic Markets Error! Bookmark not defined.
Electronic Market Connections
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Market Symbology Error! Bookmark not defined.
Securities Trading Error! Bookmark not defined.
Listing of Securities on an Exchange Error! Bookmark not defined.
When and Where to Trade Error! Bookmark not defined.
Market Indexes
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Concluding Comments
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4.3 BASIC SECURITIES AND INVESTMENT POSITIONING ERROR! BOOKMARK NOT DEFINED.
Long Positions
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Short Positions
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Margin and Cash Accounts Error! Bookmark not defined.
Additional Considerations Error! Bookmark not defined.
4.4 SECURITIES MARKETS & REGULATION
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Issuer Regulation Error! Bookmark not defined.
Exchange Reglation
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Anti-Manipulation Regulation
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Glass-Steagall and Other Regulation Error! Bookmark not defined.
Forms and Filings Error! Bookmark not defined.
Tangential Regulation
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The Character of Law
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4.5 A CLOSER LOOK AT THE INSIDER ISSUE
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What is Inside Information? Error! Bookmark not defined.
The Misappropriation Theory
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4.6 SECURITIES TRANSFER & CLEARING: THE BACK OFFICE
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Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments .................................................................................... Error! Bookmark not defined.
Technical Exercises ........................................................................................ Error! Bookmark not defined.
CHAPTER 5: INFORMATION, UNCERTAINTY, AND RISKERROR! BOOKMARK NOT DEFINED.
5.1 INTRODUCTION
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5.2 INFORMATION, MARKET EFFICIENCY, AND ARBITRAGE
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5.3 PROBABILITY, EXCPECTED VALUES, AND RISK
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Rudiments of Probability Theory
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A Definition of Risk Error! Bookmark not defined.
The Meaning of Probability Error! Bookmark not defined.
Probability and Investments Error! Bookmark not defined.
5.4 MARKET HYPOTHESES IN MORE DETAIL
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Strong EMH
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Semi-Strong EMH Error! Bookmark not defined.
Weak EMH
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The Cootner Model Error! Bookmark not defined.
Other Directions for Models Error! Bookmark not defined.
5.5 RISK AND CAPITAL ASSET PRICING: FIRST ENCOUNTERS OF THE PORTFOLIO KIND
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Risk and Return
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The Meaning of Covariance Error! Bookmark not defined.
The Fundamentals of Regression Analysis
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Risk and Asset Combinations: the Basic Result
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The Completed Portfolio and the Seperation Principle Error! Bookmark not defined.
Simplifying the Model of Asset Risk and Pricing
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Towards a Theory of Equilibrium Asset Pricing
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The Capital Asset Pricing Model
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Practical Applications
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5.6 CERTAINTY EQUIVALENTS, FRAMING, AND BIAS
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Certainty Equivalents
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Behavioral Extensions
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5.7 BEYOND BETA
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The CAPM: Through the Mill
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The Study of Fama and French, and Other Scales of Price
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Behavior: Beyond Rationality
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5.8 THE ARBITRAGE PRICING MODEL ERROR! BOOKMARK NOT DEFINED.
5.9 SOME FURTHER THOUGHTS ABOUT PROBABILITY
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Probability and Statistics
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The Long and Short of Skewness and Kurtosis Error! Bookmark not defined.
Gaussian or Not
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Risk Measures
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5.10 OF EFFICIENT MARKETS AND ASSET PRICING
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Investor Efficiency Error! Bookmark not defined.
Liquidity Error! Bookmark not defined.
Gurus and Gauges Error! Bookmark not defined.
Post-Earnings Announcement Drift Error! Bookmark not defined.
Serial Correlation, Momewntum, and Reversals
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Investment Advice Error! Bookmark not defined.
Overreaction, Underreaction, and Efficiency: the Great Debate Error! Bookmark not defined.
In the End Error! Bookmark not defined.
5.11 ACTIVE VERSUS PASSIVE MANAGEMENT
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5.12 INFORMATION AND PROBABILITY IN A UNIVERSAL CONTEXT ERROR! BOOKMARK NOT DEFINED.
Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments .................................................................................... Error! Bookmark not defined.
Technical Exercises ........................................................................................ Error! Bookmark not defined.
CHAPTER 6: THE INVESTMENT BUSINESS ....................... ERROR! BOOKMARK NOT DEFINED.
6.1 INTRODUCTION
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6.2 THE STUCTURE OF THE INVESTMENT COMMUNITY
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Members Only, Please: Pay to Play Error! Bookmark not defined.
The Risks the Sell-Side Takes
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Welcome to the Buy-Side Everyone Error! Bookmark not defined.
6.3 INVESTMENT COMPANIES: A LONG WALK ON THE BUY-SIDE ERROR! BOOKMARK NOT DEFINED.
A Share of Shares: Jump into the Pool
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The Feeling is Mutual
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Is that Loaded?
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Oh, What Fund
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6.4 THE CONTROL OF INVESTMENT FUND MANAGERS
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Fund Control
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Advisor Limitations Error! Bookmark not defined.
Taxation Regulations
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The New Generation
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6.5 FUND, MANAGEMENT, AND ADVISOR PROLIFERATION ERROR! BOOKMARK NOT DEFINED.
Lots of Hugs; Not Many Kisses
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An Object Lesson Error! Bookmark not defined.
Those Mutual Funds Have Style
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Fund Followers
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Hedge Funds
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More Funds
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Advisors and Consultants Error! Bookmark not defined.
Games Fund Promoters Play Error! Bookmark not defined.
6.6 THE CUSTOMERS ERROR! BOOKMARK NOT DEFINED.
Life Insurance Companies Error! Bookmark not defined.
Property Casualty Insurance Companies
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Banks and Savings Institutions
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Pension Funds
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Other Institutional Investors Error! Bookmark not defined.
Individual Investors Error! Bookmark not defined.
Concluding Comments
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6.7 A CENTURY OF FINANCIAL SERVICES
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Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments .................................................................................... Error! Bookmark not defined.
Technical Exercises ........................................................................................ Error! Bookmark not defined.
CHAPTER 7: DERIVATIVES.................................................... ERROR! BOOKMARK NOT DEFINED.
7.1 THE DEVELOPMENT OF DERIVATIVE FINANCIAL INSTRUMENTS
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7.2 SHORT SELLING: THE ORIGINAL DERIVATIVE PROSESS
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7.3 COMMODITIES , FORWARDS, AND FUTURES ERROR! BOOKMARK NOT DEFINED.
Forward and Futures Contracts
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Margin, Clearing, and Limits for Futures Contracts Error! Bookmark not defined.
Futures Pricing Model
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Interest Rate Futures
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Interest Rate Forwards
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Lingering Basis Risk
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Weather the Storm Error! Bookmark not defined.
Stock Market Futures
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Foreign Exchange Forwards and Futures
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Spreads
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Mixed Market Trading
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Arbitrages Error! Bookmark not defined.
7.4 OPTIONS: AN ORIGINAL DERIVATIVE INSTRUMENT ERROR! BOOKMARK NOT DEFINED.
Options Basics
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Stock Options Trading, Clearing, and Regulation
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Basic Options Positions
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Basic Options Strategies
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The Value in Options
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The Perfect Hedge: the Basis for Option Valuation
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A Simplified Option Pricing Model Error! Bookmark not defined.
Bye, Binomial: Try Trinomial………………………………………..……………………………………..468
Black Scholes Option Pricing Model Error! Bookmark not defined.
Black Scholes Example
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Advanced Options Thoughts Error! Bookmark not defined.
Smile
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Options on Other Vehicles Error! Bookmark not defined.
Portfolio Error! Bookmark not defined.
Options on Futures Error! Bookmark not defined.
Exotic Options
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Company-issued Stock Options
485
Additional Options Framing Error! Bookmark not defined.
Concluding Comments
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7.5 SWAPS
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Interest Rate Swaps Error! Bookmark not defined.
Primitive Swap Incentive
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Swap Valuation
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Swap Markets
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Swap Futures
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Other Commodity Swap Products
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Credit Swaps
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Equity Swaps
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Swap Hedging
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In Conclusion
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7.6 AN EXAMPLE OF A SPLIT AGGREGATE STOCK DERIVATIVE
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7.7 CONVERTIBLES: NOT THE CARS
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7.8 CORPORATE TAKEOVERS: AN ORIGINAL DERIVATIVE TRANSACTIONAL OPPORTUNITY ERROR!
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Motivations of Buyers and Sellers
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The Basis for Arbitrage
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Arbitrage Examples Error! Bookmark not defined.
Antitrust Issues in Mergers Error! Bookmark not defined.
Tax Considerations Error! Bookmark not defined.
7.9 STOCK BASKET SHARES: ONE STOP STOCK MARKET SHOPPING
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Of Syders and WEBS
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Exchange-Traded Portfolios and Options
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7.10 EPILOGUE
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Inter-Market Connections Error! Bookmark not defined.
The Equitization of Derivatives
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FASB Rules for Derivatives Error! Bookmark not defined.
Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments .................................................................................... Error! Bookmark not defined.
Technical Exercises ........................................................................................ Error! Bookmark not defined.
CHAPTER 8: MATHEMATICAL INVESTMENT MODELINGERROR! BOOKMARK NOT DEFINED.
8.1 INTRODUCTION
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8.2 A ROADMAP TO THE MATHEMATICAL SECTIONS
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8.3 MATHEMATICS, HISTORY & NATURE
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8.4 INVESTMENTS AS AN INTERACTING ASSET NETWORK & ABSTRACT GRAPH THEORY
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Electrical Networks and Graph Theory
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The Correspondence between Electrical and Mechanical Systems
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The Connection with Heat and Markets
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Introducing Options into the Circuit Error! Bookmark not defined.
Basic Investment Porocess Graphs Error! Bookmark not defined.
8.5 PARTIAL DIFFERENTIAL OPERATORS AND OTHER ALGEBRAS: A PRIMER
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Vector Spaces
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Linear Transformations
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Fourier Transforms: Changing Calculus to Algebra Error! Bookmark not defined.
Green's Functions Error! Bookmark not defined.
Laplace Transforms Error! Bookmark not defined.
Vector Spaces of Functions Error! Bookmark not defined.
8.6 THE CHARACTER OF PARTIAL DIFFERENTIAL EQUATIONS
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The Transport Equation
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Diffusion Error! Bookmark not defined.
The Algebra and Geometry of PDE Analysis Error! Bookmark not defined.
Boundary Conditions
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Concluding Comments
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8.7 ABSTRACT PROBABILITY THEORY AND STOCHASTIC PROCESSES
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Measures and Integration Error! Bookmark not defined.
Probability Measure Spaces Error! Bookmark not defined.
Conditional and Marginal Probabilities
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Gaussian Random Variables Error! Bookmark not defined.
Characteristic and Moment Generating Function……………………………………………………….586
Stochastic Processes and Martingales ….Error! Bookmark not defined.
Stopping and Other Times……………………………………………………………………………...……600
Dynamics and Transition Probabilities
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Various Processes and Equations………………………………………………………………….……….597 Integral
Equations and Other Useful Tools….…………………………….……………………………….600
8.8 THE BLACK SCHOLES OPTIONS MODEL
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The Generalized Heat Equation
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The Black-Scholes Equation Error! Bookmark not defined.
Inside Black-Scholes
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Beyond Black Scholes……………………………………………...……………………………….598
8.9 EXPONENTIAL PROPAGTORS AND RANDOM FIELDS ERROR! BOOKMARK NOT DEFINED.
Operators and Semigroups Error! Bookmark not defined.
Sobolev Spaces
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Boundary Conditions
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Generalized Stochastic Processes
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Concluding Comments
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8.10 CURRENT CONSTRUCTIVE MATHEMATICAL FINANCE…………………………………………..619
Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments ................................................................................................................................. 604
Technical Exercises ..................................................................................................................................... 604
CHAPTER 9: FINANCIAL INVESTMENT ANALYSIS ........ ERROR! BOOKMARK NOT DEFINED.
9.1 INTRODUCTION
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9.2 SECURITIES ANALYSTS AND VALUATION SERVICES ERROR! BOOKMARK NOT DEFINED.
About Analysts
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Stock Valuation Services
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Bond Rating Services
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Stock Ratings
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9.3 FUNDAMENTAL SECURITIES ANALYSIS
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Basic
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Financial Ratio Analysis
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Ratio Analysis Example
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Stock Price Ratios: Connecting Accounting and Market Numbers
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Private Market Value
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Debt Analysis
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Financial Distress Error! Bookmark not defined.
Epilogue Error! Bookmark not defined.
9.4 SOME FURTHER COMMENTS ON CORPORATE CAPITAL STRUCTURE AND COST ERROR! BOOKMARK NOT
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Types of Leverage Error! Bookmark not defined.
Leverage Example Error! Bookmark not defined.
Leverage and the Future of the Firm Error! Bookmark not defined.
9.5 THE MAGIC OF ACCOUNTANCY
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Leeway
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Pension Fund Accounting Error! Bookmark not defined.
Deferred Taxes
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Capitalization
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Accounting Standards
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9.6 CONTRARIAN INVESTMENT STRATEGIES
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9.7 TECHNICAL ANALYSIS: A SUPPLEMENTAL ANALYTICAL FORMALISM ERROR! BOOKMARK NOT
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Breadth Error! Bookmark not defined.
Sentiment Error! Bookmark not defined.
Basic Charting: Bars, Bands, and Moving Averages Error! Bookmark not defined.
Basic Chart Patterns
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Oscillators Error! Bookmark not defined.
Point and Figure Charting Error! Bookmark not defined.
Frameworks for Technical Analysis Error! Bookmark not defined.
Epilogue Error! Bookmark not defined.
9.8 MACRO ECONOMIC & INDUSTRY INFORMATION
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Industrial Classification
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Industry Data Sources
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Other Divisions of Economic Data Error! Bookmark not defined.
Sentiment and Complement Error! Bookmark not defined.
9.9 CYCLES ERROR! BOOKMARK NOT DEFINED.
Aggregate Business Cycle Error! Bookmark not defined.
Business Cycles and the Stock Market
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Inflationary Cycles Error! Bookmark not defined.
People Cycles
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Sub-Cycles in Markets
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Cycles and Analysis Error! Bookmark not defined.
9.10 EARNINGS AND MARKETS: THE MOST SOUGHT-AFTER MODELS
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Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments ................................................................................................................................. 709
Technical Exercises ..................................................................................................................................... 712
CHAPTER 10: PORTFOLIO THEORY ................................... ERROR! BOOKMARK NOT DEFINED.
10.1 INTRODUCTION ERROR! BOOKMARK NOT DEFINED.
10.2 INVESTMENT DEMAND: UTILITY AND OTHER INVESTOR VARIABLES AND CONSTRAINTS ERROR!
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Origins of Utility in Investment Theory
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Expected Utility Calculations
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Utility, Risk, and Return
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Marginal Utility
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Prospect Theory: an Alternative to Utility
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Toward Practical Investor Portfolio Advising Error! Bookmark not defined.
Concluding Comments
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10.3 INTRODUCTORY PORTFROLIO ANALYSIS
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Diversification
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The Algebra of the Two-Asset Portfolio
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Three-Asset Portfolio Mechanics
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Portfolio Phase Space
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Three-Asset Portfolio Solution
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Logical Considerations
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Solving for the Minimum Risk Portfolio
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Finding the Allocation Line Error! Bookmark not defined.
Concluding Comments
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10.4 MATRIX THEORY APPLICATIONS TO PORTFOLIO PROBLEMS ERROR! BOOKMARK NOT DEFINED.
The N-Asset Portfolio Problem
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The Geometry of Constrained Solutions
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Method of Solution Error! Bookmark not defined.
The Graphical Results
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Concluding Comments
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10.5 POST-CONSTRUCTION PORTFOLIO CARE ERROR! BOOKMARK NOT DEFINED.
Balancing Act
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The Rebalancing Equation Error! Bookmark not defined.
Rebalancing Example
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Destined to Lose Your Balance
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10.6 PORTFOLIO MANAGEMENT
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Active versus Passive Management Error! Bookmark not defined.
Practical Portfolio Construction
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10.7 ADVANCED PORTFOLIO THEORY CONSIDERATIONS ERROR! BOOKMARK NOT DEFINED.
Patching Standard Portfolio Theory Error! Bookmark not defined.
A Backfill Apporach
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Further Remedial Considerations
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10.8 IMMUNIZATION AND BOND PORTFOLIOS: FURTHER PORTFOLIO EXPLORATIONS
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Simple Bond Portfolio Construction Error! Bookmark not defined.
Deeper into Duration
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Parsing Bond Return
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Bond Portfolio Analysis
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10.9 BEYOND IMMUNIZATION: BOND PORTFOLIO MANAGEMENT ERROR! BOOKMARK NOT DEFINED.
The Meaning of Duration Error! Bookmark not defined.
Immunization Example
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Changing Duration Error! Bookmark not defined.
Convexity: Second Order Bond Evaluation
Error! Bookmark not defined.
Bond Portfolio Construction Error! Bookmark not defined.
10.10 ABSTRACT GRAPHS, OTHER PATHS, AND PORTFOLIO DYNAMICS
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DEFINED.
Portfolio Dynamics and Graph Theory
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Asset Number Change and Path Integrals
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10.11 ABSTRACT PORTFOLIO THEORY ERROR! BOOKMARK NOT DEFINED.
Constructing Portfolio Vectors and the Portfolio Ground State Error! Bookmark not defined.
Security Spaces
Error! Bookmark not defined.
Security Creation and Annihilation Operators Error! Bookmark not defined.
Portfolio Space
Error! Bookmark not defined.
Green's Function Propagators
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Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments ................................................................................................................................. 813
Technical Exercises ..................................................................................................................................... 815
CHAPTER 11: PSYCHOLOGICAL, SOCIAL, AND GEOPOLITICAL FACTORSERROR! BOOKMARK
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11.1 INTRODUCTION ERROR! BOOKMARK NOT DEFINED.
11.2 MONEY, MONEY, MONEY, MONEY,..., MONEY
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Money and Control Error! Bookmark not defined.
Interest Rate Parity: Dressed Cash Error! Bookmark not defined.
Margin Money: Underdressed Cash Error! Bookmark not defined.
11.3 PSYCHOLOGY AND MARKETS: BEHAVIORAL ASPECTS OF FINANCE
ERROR! BOOKMARK NOT
DEFINED.
Understanding the Mind
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Control
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Uncertainty
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Crowds
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Fortune Tellers
Error! Bookmark not defined.
Gamblers Error! Bookmark not defined.
Simplifying Decisions
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Anchors and Representativeness
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Relativity and Psychophysics Error! Bookmark not defined.
Mental Accounting and Framing
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Dissonance Error! Bookmark not defined.
The Power of Numbers
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Bubbles Error! Bookmark not defined.
Concluding Comments
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11.4 A PEEK AT COMPANY PERSPECTIVES
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The Board of Directors
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Management:: Agency and Conflict Error! Bookmark not defined.
Perqs and Other Self-Interests
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Of Egos and Fiefdoms
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Corporate governance……………………………………………………………………… ……………….839
Management Analysis
Error! Bookmark not defined.
11.5 THE TRUST DYNAMIC IN INVESTING
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Up the Ladder of Trust
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Who's Holding the Ladder? Error! Bookmark not defined.
11.6 MARKETING
ERROR! BOOKMARK NOT DEFINED.
Unlimited Limited Marketing
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Frames, Mental Accounts, and Marketeers
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Marketing: a Double-Edged Sword for Investors
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11.7 GEOPOLITICS & GLOBAL MARKETS: PERSPECTIVES AND RISKS
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DEFINED.
Economic Evolution
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The Natural Development of Free Markets
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Along the Road in the Twentieth Century
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Economies, Politics, and Legal Systems
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Agility, Survival, and Change
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11.8 GLOBAL INVESTMENT THINKING ERROR! BOOKMARK NOT DEFINED.
Global Business
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World Economics Error! Bookmark not defined.
Market Performance: a First Look Error! Bookmark not defined.
Currency Considerations
Error! Bookmark not defined.
Risk Measures
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Dividends Error! Bookmark not defined.
Multipliers: Leveraging Accounting Values Error! Bookmark not defined.
Liquidity: Turnover Rates Error! Bookmark not defined.
Diversity of Foreign Markets: Unsystematic Risk
Error! Bookmark not defined.
Trading Costs in Foreign Markets
Error! Bookmark not defined.
Country Risk: Economic and Political
Error! Bookmark not defined.
Read the Fine Print…………………………………………………………………………………………….895
Correlations
Error! Bookmark not defined.
Options for Managing International Portfolios
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Investing in International Securities Markets Error! Bookmark not defined.
Affiliation and Consolidation: a Worldwide Trend
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Summary Error! Bookmark not defined.
11.9 A DETOUR OFF THE MAIN ROAD: NON-TRADITIONAL INVESTMENTS ERROR! BOOKMARK NOT
DEFINED.
Numismatics and Metal Coins
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The Art Market
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The Value of Art Error! Bookmark not defined.
Markets for Art
Error! Bookmark not defined.
Classic Automobiles: Art You can Drive
Error! Bookmark not defined.
Art Research
Error! Bookmark not defined.
Concluding Comments
Error! Bookmark not defined.
Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments ................................................................................................................................. 927
Technical Exercises ..................................................................................................................................... 930
CHAPTER 12: INVESTMENT PORTFOLIO MANAGEMENTERROR! BOOKMARK NOT DEFINED.
12.1 INTRODUCTION ERROR! BOOKMARK NOT DEFINED.
12.2 MANAGING INVESTMENTS ERROR! BOOKMARK NOT DEFINED.
The Investment Baseline
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Irrationality
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Maximal Incomplete Information
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Professional Lessons
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Indexes and Funds Error! Bookmark not defined.
International Markets
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Individual Stock Picking
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Portfolio Construction
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Make Friends
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Discipline Error! Bookmark not defined.
Performance Evaluation
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Conclusion Error! Bookmark not defined.
12.3 TIMING ERROR! BOOKMARK NOT DEFINED.
Time What?
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Timing in the Research Journals
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12.4 TAX CONSIDERATIONS
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Tax Deferral
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12.5 PERFORMANCE EVALUATION
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Performance Attribution
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Basic One-Asset Comparisons
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Risk-Adjusted Comparisons Error! Bookmark not defined.
Performance Allocation for International Portfolios Error! Bookmark not defined.
What, Which, and Why
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12.6 LOOKING INTO THE FUTURE
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Arbitrage over Time Error! Bookmark not defined.
Technology
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Low Tech Error! Bookmark not defined.
Material Science Error! Bookmark not defined.
The Future of Computing Error! Bookmark not defined.
On Land and in the Air
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The Nano Scale
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Medical Science
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Concluding Comments
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12.7 FINAL INVESTMENT THOUGHTS: PEOPLE ERROR! BOOKMARK NOT DEFINED.
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Spurts
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Population Trends Error! Bookmark not defined.
12.8 COLLECTING INFORMATION FOR MODELING
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Traditional Information
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Non-Traditional Information
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Chapter Summary .......................................................................................... Error! Bookmark not defined.
Thought Experiments .......................................................................................................................................
Technical Exercises ...........................................................................................................................................
APPENDICES .............................................................................. ERROR! BOOKMARK NOT DEFINED.
A00. TABLE OF MATHEMATICAL LANGUAGE & SYMBOLS ERROR! BOOKMARK NOT DEFINED.
A0. SOME BASIC MATHEMATICAL CONCEPTS
ERROR! BOOKMARK NOT DEFINED.
A1 BASIC ALGEBRA ERROR! BOOKMARK NOT DEFINED.
A2 LINEAR ALGEBRA ERROR! BOOKMARK NOT DEFINED.
A3 CALCULUS MADE EASY
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A4 PROBABILITY & STATISTICS
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INDEX ..........................................................................................................................................................14
REFERENCES & FURTHER READING ................................. ERROR! BOOKMARK NOT DEFINED.
INDEX
#
, 287
Certainty
equvalent
adjustor, 287
Risk index, 288
1
10-K, 195
10-Q, 195
12b1 expenses, 341
13-D, 190
1-form, 998
3
3M Company, 172
4
401k plan, 940
8
8-K, 196
A
A/D line, 648, 650,
651
A/D volume ratio,
650
AAA, 591, 790
AAA Bond, 338
Absolute return, 358,
361, 922
Correlations, 360,
921
Funds of, 358
Absolute value, 776,
979, 1043
AC Cobra, 819, 912
Acadian Asset
Management, 894
Accountancy, 606,
633
Accounts receivable
turnover, 597
Accredited investor,
185
accredited investors,
185
Adaption level theory,
816
Adjoint, 543, 580,
581, 797, 801,
1007
Self-, 543
ADR, 164, 838
ADS, 164, 839
Advance-decline, 652
Affiliate, 642
Afghanistan, 66, 835
African markets, 308
After hours trading,
170
Agriculture, 875
AIMR, 589
AISI, 681
Algebra, 562, 1016
Basic, 986
Matrix, 1000
σ-, 562
Algebraic
Field, 994
Group, 994, 1009
Ring, 994
Algerian Stock
Exchange, 900
Alliance Capital, 894
ALM, 389, 509, 783,
1093
Almost everywhere,
570
Almost linear, 556
Alpha
and the SCL, 260
Risk Index, 287
Altman, Edward, 614,
631, 1068
Altria Group Inc., 172
American Bankers
Association, 165
American Depository
Receipts, 839
American Depository
Shares, 839
American Express,
163, 172
American
International
Group, 172
American Iron &
Steel Institute, 681
American option, 419
American Petroleum
Institute, 681
American Stock
Exchange, 157
Americus Trust, 487
AMEX, 157, 161,
169, 170, 372,
420, 653, 843, See,
American Stock
Exchange
Analysis
Basic. See
Bottom-up, 701
Fundamental, 594
Technical, 235,
648
Top-down, 701
Analyst
Credit, 610
Securities, 332,
589, 928, 973
Anchors, 815
Annual Report, 195
Annuity, 22
Deferred, 22
Single premium
deferred, 790
Antimatter, 798
Antitrust, 197, 200,
373, 503
API. See American
Petroleum Institute
Applied Material
Device, 163
APT. See Arbitrage
Pricing Model
Arab Oil Embargo,
698, 832
Arbitrage, 134, 213,
298, 403, 626
Convertible, 489
covered interest,
851
Crush value, 416
Inter-corporate
market, 493
Interest rate, 127
LBO, 626
Market index, 409
Merger, 493
Options, 433, 437
PE, 645
Arbitrage Pricing
Model, 298
Archer Daniels
Midland, 163
Archipelago ECN,
162
Argentina, 843
Armenia, 845
ARMS index, 652
Art
Dealers, 912
Margin on, 910
Market, 909
Asbestos, 613
Ask, 160
Ask price, 160
Asset-liability gap,
467
Asset-liability
management. See
ALM
Association for
Investment
Management and
Research, 589
Asuncion, 844
Attain, 162
Austria, 844
Automakers, 831
Automobiles, 691,
831, 914
Average age of
conversion, 598
Azerbaijan, 846
B
B shares
Chinese, 847
Back office, 204, 332,
504
Back-of-envelope.
See Heuristics
Bahrain, 846
Baku, 846
Balance sheet, 594
Balancing
Portfolio, 781
Ballistic path, 988,
1025
Baltic region
exchanges, 896
Bangladesh, 846
Banja Luka
Exchange, 897
Bank
Commercial, 727
Bank Holding
Company Act of
1956, 372
Banking Act of 1933.
See Glass-Steagall
Bankruptcy, 55, 490,
612
and Multivariate
discriminant
analysis, 614
Chapter 11, 612
Chapter 7, 612
Funds, 613
Barbados, 844
Barbell approach
to bond portfolio
management,
779
Barbershop, 681
Barcelona, 895
Barrels of oil, 386
Barriers to entry, 332,
613, 921, 925, See
BAS. See Block
Automation
System
Basis point, 86
Price value of, 86,
398
Basis risk, 404
BD, 190, 196, 332
Form, 196
BEA. See Bureau of
Economic
Analysis
Bear
Spread, 432
Bear hug, 495
Bear Sterns, 331
Bearer bonds, 208
Beauty salon, 681
Beer, 700
Behavioral finance,
290, 307
Behavioral Finance,
97
Behavioral school,
297
Belgrade, 844
Bell curve, 228, 1033
Benchmark, 345, 594,
766
Hugging, 345, 589
Benin, 900
Berkshire Hathaway,
594, 608
Bermuda, 838, 893
Bernoulli trials, 1040
Bessel Functions, 232
Best efforts, 57
Bet, 463
Beta, 630, 631
Convertible bond,
492
Portfolio, 771
Stock option, 451
Bicycle, 5
Bid, 160
Bid price, 160
Bilbao, 895
Bill, 49
Binomial
Coefficient, 1039
Distribution, 1039
Expansion, 1040
Theorem, 1040
Black box, 354, 930
Black market, 832
Black Scholes, 299
Black, Fisher, 299
Black-Scholes, 447,
574, 575
Block, 584
Desk, 333
Large, 333
Trading index, 651
Block automation
system, 162
Bloomberg, 162, 375,
919
Blue chip, 172, 653
Blue Sky Laws, 183
BME. See Bolsas y
Mercados
Españoles
Board of directors,
48, 185, 822
Staggered, 185
Boeing, 172
Boesky, Ivan, 203
Bolivia, 844
Bollinger bands, 657
Bolsas y Mercados
Españoles, 895
Bond, 49
AAA, 591
Callable, 80, 464
Convertible, 488
Convexity, 143,
787
Coupon, 81
Debenture, 49
Double-A, 592
Duration, 141,
611, 779
High-grade, 592
Immunization, 142
Indenture, 50
Junk, 592, 613
Medium grade,
592
Municipal, 42
Picture of, 50
Ratings, 591
Sensitivity, 84
Sinking fund, 81
Speculative grade,
592
Subordination, 50
Swap, 790
Swapping, 492
Triple-A, 592
Trustee, 50
Turnpike, 42
Valuation
equation, 81
yield to maturity,
83
Yield to maturity,
83
Zero coupon, 85
Book
Maker, 160
Specialist, 159
Bootstrapping, 122,
125
Borel set, 562
Botswana, 850, 902
Bourse Régionale des
Valeurs
Mobilières de
L’ouest. See West
African Regional
Exchange
BOVESPA, 850
Bratislava, 845
Break-even point, 627
Breakout, 670
Breakup value, 610
Bricks-and-mortar,
493, 610
Bride, 494
British Pound, 413
Broker, 56, 86, 159,
334
Floor, 159
Broker call rate, 168,
180
Broker dealer, 190,
920, See, also BD
Browian Motion, 552
Brownian motion,
571, 1049
Bubbles, 183, 374,
649, 818, 835,
919, 922
Bucharest, 845
Budapest, 842
Buffet, Warren, 594,
608
Bulgaria, 845
Bull
Spread, 430
Bundles, 401
Bureau of Economic
Analysis, 680
Burkina-Faso, 900
Burroughs, 504
Bush Administration,
936
Business Week
Magazine, 615,
688
Butter, 458
Butterfly spread, 432
Buttonwood Tree
Agreement, 372
Buy program, 410
Buy side, 331
Buy-write, 430
By-laws, 48
C
CAC 40, 850
Cage, 205
Cairo and Alexandria
Exchange, 176
Cairo and Alexandria
stock exchange,
863
CAL. See Capital
Allocation Line,
See Capital
allocation line
Calamos, J., 1073
Calculus, 1012
Fundamental
theorem of,
1024
Integral, 1022
Calculus of
variations, 1025
Fundamental
lemma, 1028
Call
Covered, 427
Call provision, 80
Calls, 417
Cameroon, 900
Capacitance
Electrical, 531
Capacitor, 529
Capacity Utilization,
695
Capital allocation
line, 257
Capital Allocation
Line, 256, 257,
747
Capital Asset Pricing
Model. See, also
CAPM
Capital gain, 89, 139,
487, 499, 504,
607, 910, 937, 938
Capital Market Line,
273
Capital One, 829
Capitalism, 32
Capitalization rate, 93
CAPM, 275, 450,
540, 655, 731,
734, 756, 776, 919
CAR. See Cumulative
Abnormal Returns
Carpenter v. United
States, 204
Carrier pigeons, 299
Casablanca, 872, 900
CASE 30, 863
Cash account, 179
Cash flow, xv, 10, 27,
30, 40, 83, 90,
101, 138, 141,
363, 501, 503,
510, 594, 595,
608, 626, 640,
730, 823, 909,
918, 924, 926, 940
Cash ratio, 597
Caterpillar Inc., 172
Causality, 812
Cayman Islands, 844
CBOE, 420
Volatility index,
652
CBOT. See Chicago
Board of Trade
CD. See Certificate of
deposit
CE. See Certainty
equivalent
Celler Kefauver Act,
200
Cement, 875
Central African
exchange, 900
Central African
Republic, 900
Central Intelligence
Agency, 877
CEO confidence, 681
Cerebral cortex, 811
Certainty equivalent,
286
certainty equivalents,
631
Certificates of
deposit, 41
CFA. See Chartered
Financial Analyst
CFA exam, 589
CFTC. See
Commodities
Futures Trading
Commission
Channel Islands, 844
Characteristic
Curve, 551
Form, 558
Function, 566
Line, 550
Vector field, 551
Charles Schwab, 374,
828
Chart
Bar, 164
OCHL, 164
Point-and-figure,
669
Charter, 48
Chartered Financial
Analyst, 589
Chartist, 654
Chase Manhattan
Bank, 194
Chen, H. Y., 286
Chen-Roll-Ross APT
model, 310
Chiarella v. U. S., 204
Chicago Board of
Trade, 171, 383
Chicago Board
Options
Exchanges, 158
Chile, 843, 850
China, 52, 831, 832,
833, 834, 845, 893
Chittagong, 846
Christie’s, 819
Cinncinnati Stock
Exchange, 158
Circuit
Electrical, 526
Circuit breakers, 170
Circuit-breakers, 411
Citibank, 375
Citigroup, 172
Class, 51
Clayton Act, 200
Clean price, 87
Clientele effect, 97
Clorox, 200
CME
International
Monetary
Market
divisiuon, 412
CML. See Capital
Market Line
Coca-Cola, 172
Cocoa, 387
Code of conduct, 186
Coefficient of
variation, 251
Cofactor, 1007
Cognitive dissonance,
817
Coincident Indicators,
688
Coins, 909
COMEX, 171
Commercial banking,
373
Commercial banks,
727
Commercial paper, 44
Commissions, 167,
332, 372, 494
Committee on
Uniform Securities
Identification
Procedures, 165
Commodieties
Spot, 171
Commodities, 6, 159,
171, 334, 464,
509, 651, 662,
674, 909, 961
Commodities Futures
Limits, 392
Commodities Futures
Trading
Commission, 422
Commodities
Research Bureau,
384
Commodities spot
market, 383
Commodity
Swap, 482
Common stock. See
Stock
Communism, 32
Company Insider
Forms, 196
Comparative
advantage, 472
Complex number,
542, 979, 983
Compounding
Continuous, 71
Computer industry,
696
Conference Board,
688
Congo Republic, 900
Consolidated quote
service, 158
Consolidated tape,
158
Constraint, 1028
Constraint equation,
749
Consultant
Fund placement,
364
Consumer price
index, 8
Consumer sentiment,
681
Contract, 3, 40, 48,
50, 56, 152, 183,
200, 506, 613,
630, 662, 833
Option, 416
Contrarian, 588, 923
Convertible
Arbitrage, 489
Beta, 492
Bond, 488
Break-even
analysis, 490
Preferred, 493
Convex, 548, 756
Convexity, 143, 787
Convolution, 545
Cook the books, 824
Cootner, 235, 1076
Core
Portfolio, 769
Position, 769
Corn, 460, 1033
Corner a market, 190
Corning, 836
Corporate raider, 493,
610
Corporation
Defined, 46
Limited liability,
48
Not-for-profit, 49
Private, 49, 923
Public, 49
S, 48
Subsidiary, 48
Correlation, 241
and International
markets, 882
Function, 250,
251, 1045
Phantom, 777
Correlations, 883
Cost
Opportunity, 10
Costa Rica, 844
Coupon
Bond, 81, 84
Clipping, 81
Rate, 83
Covariance, 239,
1048
Matrix, 245
Cover call writing,
427
Covered, 424
Covered interest
arbitrage, 851
Credit card
companies, 829
Credit event, 483
Credit swap, 483
Default, 483
Total return, 483,
484
Croatia, 840, 897
Cross-correlations,
887
Crowd, 159
Crush value, 300, 416
CSFB, 360, 894
Cumulative. See
Stock, preferred
Cumulative abnormal
returns, 310
Cumulative normal
distribution, 448
Curb, 157
Currency risk, 860
Current Account, 879
Current account
balance, 852
Current ratio, 597
Curve, 69
Convertible price,
489
Option price, 437
Portfolio, 276, 733
Utility
indifference,
715
Yield, 103, 110
Cusip, 165, 190, 205
CUSIP International
numbering system,
165
Cycles, 589, 680, 691,
913
Bull-bear, 922
Business, 696
Product, 696
Style, 701
Cyprus, 845
Czech Republic, 869,
874
D
Day order, 168
DBA, 46
DCFV, 89
Dean Witter
Reynolds, 373
Debenture, 49
Debt, 40, 49, 56, 168,
363, 497, 594,
596, 608, 611,
613, 626, 630,
822, 827, 836
Margin, 808
Mezzanine, 609
Portfolio, 775
Debtors committee,
613
Default, 40, 53, 610,
612, 614
Default swap, 483
Deferred
Annuity, 22
Charges, 595
Taxes, 608
Defined benefit plan,
636, 637, 939
Defined contribution
plan, 940
Deflation, 18
Degree
Of operating
leverage, 627
Delaware, 54
Delta, 438
Delta function. See
Dirac delta
DeMoivre, 1041
Denmark, 850
Department of
Commerce, 680
Department of
Justice. See DOJ
Depository Trust
Corporation, 205
Depression, 698
Derivative, 1014
Financial, 381
flexible, 417
Partial, 980, 1021
Radon-Nikodym,
562
Derivative
instruments, 301
Designated Order
Transfer, 162
Deutsche Borse, 840
Deutsche Telecom,
838
Developed countries,
839
Devon Energy, 184
Dhaka, 846
Diamonds, 834, 919
Index fund, 504
Dicount window, 112
Differential, 68, 1021
Gateaux, 1027
Diffusion, 231, 450,
531, 1049
Diffusion process,
552
Digital system, 320
Dipole, 1043
Dirac Delta
distribution, 230
Dirac Delta
Distribution, 566
Dirks, Raymond, 203
Dirty price, 87
Discipline, 518, 766,
769, 812, 919, 923
Discount rate, 77
Discounted cash flow
value, 89
Discounted value of
growth, 95
Discounting, 8, 19
Discriminant, 738
Discriminant analysis,
614
Discrimination line,
614
Disney, 52
Disposable Income,
699
Distressed securities,
358, 700
Funds, 613
Diversification, 55,
769
And risk, xv, 46
Portfolio, 730
Dividend, 51, 52, 88
and double
taxation, 936
and Stock Options,
419, 578
Ex-, 168, 575
Franking, 936
Fully franked, 936
Payout Ratio, 92
Short, 490, 492
Yeld, 88
Yield, 487, 490,
607, 635
Dividend declaration,
98, 168
Dividend payout
ratio, 630
Dividend
reinvestment plan,
97
Dividend signaling,
98
Dividend yield, 89,
607, 867
Dividends
and Foreign
markets, 867
DJIA. See Dow Jones
Industrial
averages, See Dow
Jones Industrial
Average
Futures Contract,
386
DK, 205
Dog and Cat Food
Manufacturing,
681
Doing businesss as,
46
DOJ, 200, 503
Dominance, 298
DOT, 200, See
Designated Order
Transfer
Double-A, 592
Dow
Theory, 672
Dow Jones
Industrial
averages, 505,
649, 653, 672,
968
Transportation
averages, 672
Dow Jones Industrial
Averages, 172
Dow Jones 30
Industrial
Averages, 172
Dow Jones Industrial
Average, 386
Dr. Spock, 810
Dreman, David, 313,
919, 1077
Drexel Burnham
Lambert, 373
Dreyfus, 340
Driver’s license
model, 332
DTC. See Depository
Trust Company
Dunn & Bradstreet,
590
DuPont System, 597
Duration, 141, 611,
785
Adjusted, 141
Fulcrum of, 142
Gap, 485
DVG. See Discounted
value of growth
E
E.F. Hutton, 828
E.I. DuPont de
Nemours & Co.,
172
EAFE, 848, See
Europe Australasia
Far East
Earnings retention
rate, 631
Earnings retention
ratio, 92
East Africa, 901
East Asian and
Oceanian Stock
Exchanges
Federation, 892
Ebay, 911
E-Bay, 61
ECN. See Electronic
communication
network
EDGAR, 196, See
Electronic Data
Gathering and
Retrieval
On-line, 615
EDGAR-On-Line,
197
EEU, 52, 833
Effective, 184
Effective interest
rate, 14
Efficient Market
Hypotheses, 213
Efficient market
hypothesis, 234
Efficient Market
Hypothesis
Semi-strong, 234
Strong, 234
Weak, 235
Efficient portfolio
frontier
and International
markets, 890
Einstein, 570
El Salvador, 844
Electron, 553
Electronic
communication
network, 162
Electronic Data
Gathering And
Retrieval system,
197
Elementary particle,
798, 985, 1028
Elliott wave, 673
Ellipse, 735, 989, 991
Elliptic equation, 558
Emerging market,
361, 362
Emerging markets,
359, 361, 839
EMH. See Efficient
Market Hypothesis
Employee Retirement
Income Security
Act, 369
Endowment effect,
818
Enron, 53, 824
Entropy, 321
EPS, 88
Equatorial Guinea,
900
Equity, 40, 48, 51, 56,
87, 363, 487, 488,
509, 595, 598,
606, 626, 808,
822, 923, 924
Court of, 55
Margin account,
180
Method, 642
Option, 421
Swap, 484
Synthetic, 433
Equity Funding
Corporation of
America, 203
E-Signal, 919
Euler-Lagrange
equation, 1028
Euler-Lagrange
Equation, 752
Eurodollar deposits,
467
Eurodollar market, 43
Euronext, 896
EuroNext, 162, 166,
171, 308
European option, 419
Exchange
Commodities, 159,
171
Floor, 159
Member, 331, 373
New York, 157
Options, 419
Regulation of, 183
Seat, 331
Stock, 157
Exchange offer, 499
Exchange options,
890
Exchange Rate Model
Fundamental
equilibrium,
851
monetary
approach, 851
portfolio balance
approach, 851
Purchasing power
parity, 851
Ex-dividend, 168,
419, 578
Exercise, 417
Irrevocable, 433
Expectations
hypothesis, 115
Expected value, 217,
See Mean
Expiration, 81, 197,
417, 421, 422,
576, 651, 808
Exponential
And continuous
compounding,
71
Function, 71, 982
Smooting, 657
Extrema, 1018
Exxon Mobil, 172
Eyeglasses, 836
F
Factorial, 1038
Fair game, 229
Fairness opinion, 199
Fama, Eugene, 304
Fannie Mae, 45
FASB, 510, 643, 841
FCC. See Federal
Communications
Commission
FD, 590
FDA, 200
FDIC. See Federal
Deposit Insurance
Corporation
Federal agency
obligations, 44
Federal
Communications
Commission, 200
Federal Deposit
Incurance
Corporation, 41
Federal Express, 163,
831
Federal funds rate, 45
Federal Funds Rate,
112
Federal Home Loan
Bank, 44
Federal Home Loan
Mortgage
Corporation, 44
Federal National
Mortgage
Association, 44
Federal Reserve
Bank, 45, 807
Federal Reserve
Board, 108, 168,
183, 911
Federal Trade
Commission, 200
Act, 200
Federation of
European and
Asian Exchanges,
892, 898
Federation of
European Stock
Exchanges, 892
Federation of
Financial
Analysts, 589
Federation of IberoAmerican Bourses,
892
FESE, 308, See
Federation of
European and
Asian Exchanges
FF model. See Fama
& French
FHLB. See Federal
Home Loan Bank
FHLMC. See Federal
Home Loan
Mortgage
Corporationj
FIAB. See Federation
of Ibero-American
Bourses
Fibonacci, 675
Fill or kill, 168
Filter rule, 311
Financial Accounting
Standards Board,
643
Financial Ratios
DuPont System,
597
Financial statement
analysis, 594
Fincncial asset, 40
First Call, 314
Fisher effect, 110,
851
International, 851
Five-card-stud, 1039
Fixed charge
coverage, 597
Flat, 468
Flexible, 417
Floor, 159
Flour Milling, 681
Fluoride, 1032
FNMA. See Fedral
National Mortgage
Association
Fokker-Planck
equation, 571
Ford, 831
Foreign exchange, 17,
213, 851
Spot rate, 808
Foreign Exchange
Rates, 857
Foreign government
debt obligations,
43
Fortune Tellers, 813
Forward Looking
Statements, 828
Forward rate, 115,
117, 401, 807
Forward rate
agreement, 402
Forward-looking
statements, 185
Fourier
Transform, 545
FRA, 402, See
Forward rate
agreement
Framing, 290, 298,
725, 817, 829
Franking, 99, 936
FRB. See Federal
Reserve Board
Freddie Mac, 44
Freud
Sigmund, 810
Frontier
Efficient portfolio,
756
FTC, 372, 503, See
Federal Trade
Commission
FTSE, 176
Fuel cells, 959
Fulcrum of duration,
142
Fuller & Thaler Asset
Management, 311
Function, 981
Generalized, 544
Functional, 544
Functional Analysis,
585
Fundamental
equilibrium
exchange rate
model, 851
Fundamental variable
of investment
theory, 67
Funds
Private Capital,
725
Future contract, 386
Future value, 8, 11
Futures, 464
Commodity, 373
Currency, 807
Currency crossrate, 890
Margin on, 411
Market index, 506
Options on, 373,
457
Trend index, 652
G
GAAP. See Generally
Accepted
Accounting
Principles
Gabon, 900
Gambler, 715, 827
Gambler’s fallacy,
815
Gambling, 160, 333,
832
House, 160, 333
Gamler’s Falacy, 231
Gap
Asset-Liability,
467
Duration, 485
Gaussian, 886, 1041
Distribution, 565,
1033
Elimination, 1005
Gaussian distribution,
228
GDP, 692, 839
Price deflator, 697
General Electric, 164,
172, 823
General linear group,
1009
General Motors, 52,
172
Generally Accepted
Accounting
Principles, 101
Georgia, 846
Germany, 844
Getty
Gordon, 54
J. Paul, 54
Oil, 54
Ghana, 900
Giant Foods, 685
GIC. See Guaranteed
investment
contract
GIC’s. See
Gauranteed
investment
contract
Ginnie Mae, 45
GL(n,R), 1009
Glass-Steagall Act,
205, 375
GM, 262
GNMA, 460, See
Government
National Mortgage
Association
Gold, 363, 806, 831
Coins, 909
Standard, 17, 698
Golden Rule, 675
Goldman Sachs, 331,
807
Government National
Mortgage
Association, 45
Graham and Dodd,
594
Graham, Benjamin,
594
Gramm-Leachey, 194
Grand Metropolitan
PLC, 204
Granville, Joe, 309
Graph Theory, 528
Greece, 850, 893
Green’s function, 802
Green's function, 546
GRETAI, 845
Groom, 493
Gross Domestic
Product, 680
GTC, 168
Guaranteed
investment
contract, 786, 790
Guaranteed
investment
contracts, 367, 519
Guinea Bissau, 900
H
H shares. See Hong
Kong Exchange
Haircut, 168
Hamada, Robert, 630
Hammer, Armand,
823
Hand-holding, 298
Hang Seng, 849
Hart Scott Rodino,
200, 503
Head and shoulders,
658
Heat
Conductance, 575
Equation, 450,
570, 574
Equation,
Generalized,
575
Transfer, 231,
1049
Heat equation, 450
Heat flow, 552
Heaviside function,
544
Hedge, 333, 437, 490,
510, 540, 771,
802, 920, 927
Fund, 185, 342,
358, 511, 921,
928
Money market,
401
Natural, 486
Ratio, 437, 491,
495
Hedge fund, 893
Hedge ratio, 404
Hedging
Dynamic, 454
Herfindahl-Hirshman
Index, 503
Heuristics, 297, 814
Hewlett-Packard, 172
HHI, 503, See,
HerfindahlHirshman Index
Hilbert space, 548
Holding period, 15
Holding period
return, 15, 77
Holographic image,
321
Home Depot, 172
Honduras, 843
Honeywell
International, 173
Hong Kong, 834, 845
Horizon
investment, 725
Hotels, 363
House
Brokerage, 331
Gambling, 160
HSR, 200, 503, See
Hart Scott Rodino
Hungary, 844, 871
Hunt brothers, 909
I
I Ching, 813
IASB. See
International
Accounting
Standards Board,
See International
Accounting
Standards Board
IBM, 109, 163, 262,
280, 836, 962
ICRG. See
International
Country Risk
Guide
Identity
Function, 73
Matrix, 1001
Illusion
Money, 110
Illusion of control,
812
Illusion of validity,
298, 818
Imaginary number,
983
Imclone, 203
Immunization, 142,
785
And ALM, 783
Bond Portfolio,
779
Implied volatility, 507
Imputation tax credit,
936
Income statement,
594
Incorporation, 48
Indenture, 50
Index
Float-adjusted,
174
Total return, 174
Index fund, 924
Exchange-traded,
365
Indexing, 768
India, 845
Individual Retirement
Accounts, 939
Indonesia, 871
Induction, 215, 1041
Mutual, 534
Inductive reasoning,
1018
Inductor, 529
Industrial Production,
694
Inflation, 7, 9, 17, 66,
697
Rate, 18
Information, 4, 57,
76, 160, 184, 212,
213, 224, 229,
234, 531, 646,
833, 918, 919, 973
Correlation
function, 320
Function, 320
Material nonpublic, 215
Theory, 320
Information Agent,
198
Information
Statements, 195
Initial public offering,
57
Inner product, 251,
543
Inside information,
193, 215, 374, See
also, Information,
Inside
Instinet, 162, 163
Institute for Scrap
Recycling
Industries, 681
Institute of Chartered
Financial
Analysts, 589
Institutional investor,
178
Institutional sales,
332
Insurance companies,
727
Insurance Company
Life, 366
Property and
casualty, 368
Integration, 562, 1024
By parts, 1025
Symbol, 979
Weiner path, 585
Integration by parts,
1025
Intel Corp., 173
Interest, 9, 10
Arbitrage, 127
Bond, 40
Conflict of, 194,
341
Continuously
compounded,
71
Rate, 2, 10
Rate cycles, 696
Rate on options,
434
Rate risk, 710
Rate sensitivity,
84
Riskless rate, 237,
430
Sensitivity, 138
Simple, 13
Term structure,
110
Interest rate
Annual effective,
14
Nominal, 14
Per period, 14
Real, 110
term structure, 113
Intermarket trading
system, 158
Internal rate of return,
502
Internal Revenue
Service, 342
International
Accounting
Standards Board,
643, 841
International
Association of
Swap Dealers
Association, 480
International Country
Risk Guide, 878
International
Monetary Fund,
877
International
Securities
Identification
Number system,
166
Intrinsic value, 89
Inventory turnover,
597
Inventory-sales ratios,
688
Investment
Horizon, 725
Investment advisor,
194, 652
Sentiment index,
652
Investment Advisors
Act of 1940, 194,
342
Investment bank, 56
Investment Company
Act of 1940, 194,
340
Inveswtment
Intrinsic value of,
89
IPO, 912, See Initial
public offering
IRA, 939
Roth, 939
IRS, 487
ISDA. See
International Swap
Dealers
Association
ISDA Benchmark
Rate, 481
ISIN. See
International
Securities
Identification
Number System
Island, 162
ISLAND, 159
Iso-mean, 735
Iso-variance, 735
Israel, 846
ISRI. See Institute for
Scrap Recycling
Inustries
Istanbul, 308
ITS. See Intermarket
trading system
Ivory Coast, 900
J
J.P. Morgan, 194, 373
J.P. Morgan Chase,
173
Jakarta, 842
Japan, 18, 170, 215,
832, 833, 923, 926
Jeffries
Boyd, 373
Securities, 373
Jensen, 947
Jetsons, 961
Johannesburg Stock
Exchange, 902
John Deere Tractor,
434
Johnson & Johnson,
173
Joint venture, 642
Jordan, 846, 893
Jung, C. G., 812
Junk bond, 592
Funds, 613
Market, 373
K
K Mart, 613
Kansas City Board of
Trade, 383
Karachi, 846
Kazakhstan, 846
Kellogg’s, 262, 460
Kelloggs, 685
Kenya, 901
Keough plan, 939
King, B. F., 291
Kirchoff, 529
Kohlberg Kravis
Roberts, 493
Kolmolgorov
Theorems of, 570
Komologorov, 570
KOSDAQ, 842
KOSPI, 849
Kravis
Henry, 493
Kurtosis, 227, 1045
Kuwait, 846
Kyrgyzstan, 846
L
L shares, 892
Laddered approach
to bond portfolio
management,
779
Lagging Indicators,
688
Lagrange, 1028
Lagrangian, 585,
1026
Multiplier, 752,
1028
Lahore, 846
Laplace
Approximation of
binomial, 1041
Equation, 559
Transform, 546,
582
Large-cap
Index fund, 506
Stocks, 352
Law, 2, 3, 47, 54, 55,
59, 183, 185, 199,
200, 201, 495,
613, 822, 833, 936
Law of large
numbers, 230,
1036
Law of one price, 851
LBO, 364, See
Leveraged Buy
Out
LCE, 383
Leading indicators,
688
LEAPS, 421
Lebanon, 846
Lebesgue spaces, 547
Legal list, 727
Leibnitz, 1012
Lennon, John, 819
Leptokurtic, 304
Lesotho, 902
Leverage
Financial, 627
First-stage. See
Operating
Leverage
Operating, 627
Leveraged Buy Out,
609
liability
Spontaneous, 630
LIBOR, 467, 481, See
London InterBank Offer Rate
Flat, 468
Life Insurance, 724
Life-cycle, 723
LIFFE, 171, 308, 896
Lima, 842, 893
Limbic cortex, 811
Limit, 1013
Limit order, 168
Linear
Operator, 543, 999
Transformation,
543, 999
Liquidation value,
610
Liquidity, 308, 870
Liquidity premium
hypothesis, 115
liquidity risk, 726
Listed, 169
Ljubljana, 845
Logarithm
And price, 72
London business day,
481
London Commodities
Exchange, 383
London Inter-Bank
Offer Rate, 45
London Interbank
Offerd Rate, 467
London Internation
Futures Exchange,
171
London Stock
Exchange, 162,
170
Long, 166
position, 178
Long position, 178
Long Term Capital
Management, 299,
906, 919
Lopez, Lola, 370
Loss aversion, 290
Lumber, 388
Lusaka Exchange,
873
LuSE index, 176
Luxembourg, 844,
906
LYONs, 829
M
M2, 949
Macaulay, 611
Macedonia, 845
Machiavelli, 1089
MacLean
Paul, 811
Madrid, 895
Malawi, 902
Malaysia, 845, 871
Mali, 900
Malkiel, Burtram, 630
Maloney Act, 194
Mammals, 811
Mandlebrot, Benoit,
304
Manipulation, 59,
183, 190, 375,
643, 813, 973
Exemption, 192
Margin, 168, 183,
411, 423, 499,
734, 772, 910,
920, 1049
and Portfolio
Theory, 775
Call, 919
Commodities
futures, 392
Convertible
arbitrage, 488
Limits, 183
Maintenance, 180
On stock options,
423
Margin account, 179
Margin call, 181
Margin loan, 180
Marginal productivity
of capital, 110
Mark to market, 178
Market
Bear, 278, 648
Black, 832
Breadth, 648
Bull, 278, 648
Cornering, 190
Efficient, 213
Electronic, 162
Emerging. See
Emerging
Markets
Index funds, 505
Inefficient, 214,
613, 920, 923,
926
Inside, 160
Inter-bank, 45
Primary, 57, 154
Secondary, 154
Specialist, 159
Third, 161
Market capitalization
to GDP ratio, 841
Market index
Capitalization
weighted, 173
Price weighted,
173
market indexes, 172
Market indexes, 847
Market maker, 160
Market segmentation
hypothesis, 131
Marketing, 331, 358,
364, 626, 806,
821, 823, 828, 910
Markets
National regional,
158
Trendless, 662
World regional,
158
Markets, National,
158
Markov condition,
562, 569
Markowitz, Harry,
259
Mark-to-market, 166
Martha Stewart, 613
Martingale, 235
Matrix, 245, 543,
1000
Addition, 1004
Determinant, 1006
Inverse, 754, 1001
Multiplication,
1002
Transition, 548
Transpose, 1004
Mattoli, 1091
Mauritius, 902
May Day, 373
McDonald's, 173
McGraw Hill, 591
McGraw-Hill, 375,
615
Mean, 217, 564
Mean-variance
decision-making,
259
Measure, 562
Space, 562
Medical science, 962,
1032
Member, 331
MENA, 900
Mental accounting,
298
Mental Accounting,
817
Mental accounts, 290,
814, 829
Merck & Co., 173
Merger. See Takeover
Merrill Lynch, 829
Merrill Lynch Pierce
Fenner and Smith,
373
MICEX, 842
Michael Milken, 374
Microsoft, 109, 163,
173, 262, 421
Mid-Cap, 352
Middle East, 460,
831, 834
Milken, Michael, 373
Minimization, 1017
Minor, 1007
Mint, 909
Mitchell Energy, 184
MMM, 109, 260, 262
MOB, 415
Mobius strip, 985
Modigliani-Miller,
823
Moldavia, 845
Molecular gas, 563
Molecule, 219, 320,
962
Moligdiani, 949
Moment
First, 217
Fourth, 1045
Second, 224
Third, 776
Momentum, 655, 662
Monetary approach
exchange rate
model, 851
Money, 17
Bare, 807
Dressed, 807
Supply, 807
Time value, 19
Money illusion, 110
Money market, 41
Money market hedge,
401, 403
Mongolia, 845
Montevideo, 844
Moody’s, 590
Morgan Stanley, 374,
828
Morgan Stanley
Capital
International,
176, 505
Morocco, 846
Mortgaged-backed
securities, 338
Moving averages, 655
Mozambique, 902
MSCI, 505, 848, See
Morgan Stanley
Capital
International
MSCI All country
Index, 953
MSCI Developed
Country Index,
905
Mulhern, John, 203
Multexinvestor.com,
262, 615
Multinomial
Coefficient, 1040
Distribution, 1041
Mumbai, 845
Municipal bonds, 42
Murdock, Rupert, 504
Mutual fund, 234, 340
Back-end load,
338
Closed-end, 336
Front-end loaded,
338
Large cap, 352
Mid cap, 352
No-load, 338
Open-end, 336,
341
Pass-through
status, 342
Small cap, 352
Supermarkets, 340
theorem, 308
Value, 352
Mutual fund theorem,
308
Mutual funds, 903
Mutual Funds
Integrity and Fee
Transparency
Act of 2003,
343, 375
Muuler-Lyer diagram,
816
Myers, S. C., 286
N
NAICS. See North
American Industry
Classification
System
Naked, 424
Namibian Stock
Exchange, 902
Nano technology, 962
NAR. See National
Association of
Realtors
NASD, 331
NASDAQ, 158, 843
Sucription levels,
161
National Association
of Realtors, 681
National Association
of Securities
Dealers. See
NASD
National Income and
Products
Accounts, 680
Natural log, 71
NAV, 337, See Net
asset value
Neighborhood, 547,
1013
Net asset value, 335
New York Mercantile
Exchange, 383
New York Stock
Exchange, 157
New York Times, 973
New Zealand, 845
Newton, 1012
Newton, Isaac, 1040
NexTrade, 162
Nickels and dimes,
421
Niger, 900
Nikkei 225, 176
Nikkei 225 Futures,
891
NIPA. See National
Income and
Product Accounts
NOB, 414
Nominal interest rate,
14, 20
NOREX alliance, 896
Normal distribution,
228, 1048
Cumulative, 448
Nortel, 838
North American
Industry
Classification
System, 680
Norwalk Agreement,
841
Note, 49
Nouveau Systeme de
Cotation, 162
Noxzema, 828
Nuclear
Fusion, 959
Magnetic
resonance, 959
Missile, 966
Particles, 798
Power, 528, 959
Threat, 835
Numismatics, 909
NYMEX, 383
NYSE, 157, 162, 331,
360, 362, 372,
411, 648, 696,
843, 965, 966, See,
also New York
Stock Exchange
Most expensive
stock on, 594
NYSE composite
index, 172
NYSE Index, 174
O
O’Connor, William,
294
Oats, 386
OCC. See Options
Clearing
Corporation
Occidental Petroleum,
823
Octonion, 985
Octopole, 777, 1045
Odd-lot, 168
Buy/sell ratio, 652
Offer price, 160
Ohm’s Law, 531
Oil, 215, 363, 372,
460, 691, 831,
832, 834, 836
Oman, 846
OMX Exchanges,
308
OMX group, 896
Onassiss, 831
OPEC, 834, 836
Open interest, 417,
662
Operating leverage,
627
Operator
Annihilation, 798
Creation, 797
Linear, 523
Opportunity cost, 10
Option
American, 419,
451
Asian, 462
Assingment, 419
Barrier, 463
call, 417
Contract, 416
Covered, 424
Currency crossrate, 890
Delta, 438, 453
European, 419,
451
Exercise, 417
Exotic, 462
Expiration, 417,
422
Foreign
currencies, 456
Gamma, 453
In the money, 417
Interest rate, 456
Intrinsic value,
418
Kappa, 453
Margin on, 423
Market indexes,
456
Naked, 424
On futures, 457
Open interest, 417
Out of the money,
417
Premiums, 436
put, 417
Replication, 454
Rho, 453
smile, 455
Spread, 430
Straddle, 431
Strike price, 422
Theta, 453
Vega, 453
Writing, 417
Options
Flexiblystructured, 420
Parity Equation,
450
Options arbitrage, 433
Options Clearing
Corporation, 422
Options Replication,
454
Orbis Mutual Funds,
894
Order
Day, 168
GTC, 168
Imbalance, 170
Limit. See
Stop, 168
Organization for
Economic
Cooperation and
Development, 877
Organization for
Security and
Cooperation in
Europe, 877
Ornstein-Uhlenbeck
process, 571
OSCE. See
Organization for
Security and
Cooperation in
Europe
Oscillator, 662
Oslo Børs, 841
OTC, 157
OTC Bulletin Board,
169
Outer product, 1002
Overbought, 662, 665
Oversold, 662, 665
Over-the-counter, 157
P
P/E ratio, 93, 152,
606, 607
Pacific Rim, 834
Pacific Stock
Exchange, 170,
420
Packs, 401
Pakistan, 846
Paleomammalian
Part of the brain,
811
Palestine, 846
Panama, 844
Papua New Guinea,
899
Par value, 51, 52, 192,
197, See Stock,
par value
Paraguay, 844
Paretian distribution,
235, 304
Paris Bourse, 170
Parking, 190
Partial derivative,
1021
Symbol, 980
Partial differential
equation, 544
Partnership, 47
Limited, 47
Pass on, 57, 184
Path integral, 585
PB. See Price to book
ratio
PDE. See Partial
differential
equation
PE ratio, 88, 868
PEAD. See Postearningsannouncement
drift, See Postearningsannouncement
drift
Peers, 929
Pennies, 169
Pennzoil, 54
Pension fund, 334,
369, 636
Past service
liability, 636
Vesting, 637
Pension funds, 725
Per period interest
rate, 14
Perpetuity, 53
Perqs, 823
Personal flying
machine, 961
Personal income, 687
Pet rock, 828
Pfizer, 173
Phase space, 563
Orbit, 736
Phase Space
Portfolio, 736
Philadelphia Stock
Exchange, 157,
420
Philippines, 850
PHLX, 157, 170, 420,
See Phialdelphia
Stock Exchange
Photo finishing, 681
Picker, 912
Pillsbury, 204
Pink Sheets, 169
Pit, 159
Platinum, 909
PMV. See Private
market value
Poison pill, 495
Poisson
approximation,
1041
Poisson equation, 558
Poker, 1039
Polaroid, 836
Political Risk
Services Group,
878
Pooling of interests,
642
Population, 216, 220,
615, 698, 701,
962, 964
Port Moresby
exchange, 899
Portfolio, 239, 253,
730
Diversification,
730
Efficiency, 737
Efficient frontier,
256
Exchange-traded,
506
Frontier, 756
Insurance, 790
Minimum risk,
745
Most efficient,
745
Optimal risky, 257
Phase space, 736
Rebalancing, 538,
761
Weight, 731
Portfolio insurance,
457
Portfolio management
Active, 768
Passive, 768
Portfolio space, 797
Position
Virtual, 424
Positioning, 178
Posner, Victor, 938
Post Cereals, 685
Post-earningsannouncement
drift, 309
Prague, 842
Prague Stock
Exchange, 874
Pre-emergent
markets, 861
Preemptive rights, 53
Preferred stock, 52,
594
Convertible, 493
Cumulative, 53
Valuation model,
88
Voting rights, 53
Preffered stock
Par value, 52
Premium
Risk, 434
Time, 434
Present value, 8, 18,
27, 135, 212, 497,
611, 780
Annuity table, 27
Graph, 22
Table, 20
Price deflator, 8
Price inflator, 8
Price to book ratio,
869
Price value of a basis
point, 86, 398
Prime rate, 112, 608
PRIMEs, 829
PRIME's, 487
Principal
Registered, 190
Private capital
Funds, 493, 923
Private capital fund,
364
Private Capital Fund,
725
Private market value,
608
Private placement, 56,
364
Private Securities
Litigation Reform
Act of 1995, 185
Pro rata, 498
Probability, 216, 562
Conditional, 240,
564, 1048
Cumulative, 222
Distribution, 216,
563, 1033
Joint, 240, 1048
Marginal, 240,
565, 1048
Measure, 563
Measure space,
563
Moments, 533,
534
Transition, 570
Probability
distribution
Skewed, 302
Procter & Gamble,
173
Procter and Gamble,
200
Prohibition, 832
Projection, 997, 998
Proprietary trading,
333
Prospect theory, 290
Prospectus, 56
Provenance, 911
Proxy
Contest, 185
Material, 195
Solicitation, 185
PRS. See Political
Risk Services
Group
Prudent person rule,
727
PSE. See Pacific
Stock Exchange,
See Pacific Stock
Exchange
Psychology, 2, 650,
677, 810, 822,
824, 1077
Psychophysics, 816
Public Utilities
Holding Company
Act of 1935, 497
PUCHA, 375
Purchase method, 642
Purchasing manager
sentiment, 681
Purchasing power
parity, 851
Purchasing power
risk, 7
Puts, 417
PVBP. See Basis
point, price value
of
Pythagorean
Theorem, 224, 994
Q
Quadratic formula,
988
Quadrupole, 776,
1045
Quanto, 891
Quark, 798
Quaternion, 985
Queen Dido of
Carthage, 1025
Quick ratio, 597
R
R.J. Reynolds, 493
Radon-Nikodym
Theorem, 562
Railroads, 497, 831
Random variable,
217, 563, 1033
Random walk, 447,
450, 552, 1049
Rate
Of return, 13, 19,
41, 70, 83, 88,
135, 227, 237,
493, 494, 607,
675, 781, 812,
927
Riskless, 237
Ratio analysis, 596
Ratios
and Technical
analysis, 649
Coverage, 597
Put/call, 652
Turnover, 597
R-complex, 811
Real asset, 32, 38
Real Estate
Investment Trust.
See REIT
Real interest rate, 20,
See Marginal
productivity of
capital
Rebalancing
Equation, 762
Portfolio, 761, 783
Record date, 99
Red Chip Index, 848
REDIBook ECN, 162
Reg D, 185, 342
Reg T, 183
Registered principal,
190
Registered
representative, 189
Registration
Statements, 194
Regression, 246, 1049
Regret aversion, 818
REIT, 363, 460, 725
Relative advantage,
468
Relative strength
index, 665
Reorg, 205, 504
Replacement cost
value, 610
Repo, 45
Representativeness,
297, 815
Reptiles, 811
Repurchase
agreement, 45
Reverse, 45
Resistance
Electrical, 529
Level, 660, 671
Restricted stock, 196
Retracement, 660,
672
Return on investment,
15
Rho
Correlation
coefficient, 253
Rights, 100
Risk, 227
and number of
portfolio
constituents,
255
And variance, 226
Basis, 404
Interest rate, 138
Liquidity, 726
Management, xv,
xvii, 46, 353,
487, 710, 731,
765, 769, 770,
920, 926, 927,
929
Political, 878
Purchasing power,
7
systematic, 259
Systematic, 246
Timing, 725
unsystematic, 259
Unsystematic, 246
Risk premium
Option, 434
Riskless
Virtual position,
439
Robinson Patman
Act, 200
Rodichek, A. A., 286
Rogers, Kenny, 76
ROI, 15, See Return
on investment
Rolls-Royce, 831
Romania, 871
Ross, Stephen, 299
Rothschildes
The Baron de, 299
Royal Dutch Shell
Oil, 52
Royalty Trusts, 363
RSI, 665
RTS. See Russian
Trading System,
See Russian
Trading System
Rubin, Robert, 807
Rudin, 1096
Rukeryser, Louis, 314
Rule FD, 590
Russel indexes, 176
Russia, 831, 832, 833,
834, 846
Russian Trading
System, 174, 871
S
S&P, 591, See
Standard & Poors,
See Standard &
Poors
SADC. See South
African
Development
Community
Sale-and-lease-back,
727
Salience, 828
Sample, 216, 1036
Santiago, 842
Sarbanes-Oxley Act,
926
SARS, 962
Saudi Arabia, 850
Savings & Loan, 464
Savings & Loan
industry, 592
Savings bond, 9
Savings Rate, 699
Sawmills, 681
SAXESS trading
system, 896
Scalar, 994
Schroedinger
equation, 584
SCL. See Security
characteristic line
Scorched earth, 494
SCORE's, 487
SEAQS. See Stock
Exchange
Automated Quote
System
Sears, 373
Seat, 331
SEC. See Securities &
Exchange
Commission
vs. Equity Funding
Corp. of
America, 203
Securities
Borrowing, 166,
167
Clearing, 204
Listed, 169
Long position, 166
Registered, 184
Short position, 166
Thinly-traded, 166
Transfer, 204, 205
Transferability, 53
Securities account,
167
Buying power,
181
Cash, 179
Institutional, 178
Margin, 179
Retail, 178
Securities Act of
1933, 183
Securities and
Exchange
Commission, 56,
169
Securities exchange.
See Exchange
Securities Exchange
Act of 1934, 183
Section 13e-2, 196
Securities Investor
Protection Act of
1970, 182
Securities Investor
Protection
Corporation, 182
Security characteristic
line, 260
Security exchange
symbol. See
Ticker symbol
Security market line,
275
Security Space, 796
Sell side, 331
semiconductor
industry, 689
Semigroup, 580
Senegal, 900
Sensitivity, 84, See
Bond; interest
Separation principle,
258, 770
Serbia, 871
Serial correlation, 311
Series Seven Exam,
189
SETS. See Stock
Exchange
Electronic
Transaction
Service
Settlement, 205
Shanghai, 842
Shanghai Stock
Exchange, 847
Shannon
Claude, 320, 1097
Share
Of profits, 334
Partnership, 48
Stock, 49
Share buyback, 97
Shareholder-ofrecord, 168
Shareholders' meeting
Special, 186
Shareholders’
meeting
Annual, 186
Sharon Steel, 938
Sharpe ratio, 947
Sharpe, William F.,
260
Shelby Cobra, 912
Shelby, Carroll, 819
Shelf registration, 184
Shenzhen, 842
Sherman Act, 200
Shock wave, 572, 578
Short
Against the box,
182
Covering, 179
Position, 179
Sale, 166
Selling, 382
Tender, 499
Short against the box,
182
Short interest, 167,
662
Short sale
Against the box,
420
Rule, 382
Short tender
restriction, 499
Short-swing Profit
rule, 193
SIC, 680
sigma, 23
Silent partner, 47
Silver, 17, 806, 831
Certificate, 17
Coins, 909
Simple interest, 13
Singapore, 845
Single city girl, 215
single factor model,
259
Single premium
deferred annuities,
790
Sinking fund, 81
SIPC. See Securities
Investor Protection
Corporation
Skewness, 226, 1044
Sky Bar, 836
SL(n,R), 1009
Slovakia, 845, 864
Slovenia, 845
Small Order
Execution system,
162
Small-cap
Index fund, 506
Stocks, 352
Smart money, 651
Smeared, 584
Smile, 455
SML, 275
Sobolev Space, 581
Social security, 939
Social Security, 370
SOES. See Small
Order Execution
System
Sole proprietorship,
46
Sony, 838
Soros, George, 926
South Africa, 872,
902
South African
Development
Community, 902
South Penn Oil, 54
South Seas Bubble,
818
SPDA’s. See Single
premium deferred
annuity
SPDR, 510
Special linear group,
1009
Specialist, 59, 159
Sperry, 504
Spin-off, 497
Spot rate, 808
Spread, 86, 113, 214,
215, 224, 237,
277, 423, 494,
495, 626, 917
Bear, 432
Bull, 430
Butterfly, 432
Calendar, 430
Diagonal, 431
Horizontal, 430
Options, 430
Vertical, 430
Spyders, 505
Sri Lanka, 845
Srpska Republic, 897
SSE. See Shanghai
Stock Exchange
Standard & Poors,
165, 175, 375,
590, 591, 615
Standard deviation,
225, 1043
Standard error, 247,
1050
Standard Industry
Classification. See,
also SIC
Standard Oil, 200
Standardized
unexpected
earnings, 310
State-preference, 298
State-preference
model, 631
Statistics, 1032
Bose-Einstein,
1037
Fermi-Dirac, 1037
Lying with, 1047
MaxwellBoltzman,
1037
Status quo bias, 818
Stirling
approximation,
1042
Stochastic process,
450, 568, 1049
Generalized, 580
Stochastics, 667
Stock, 40
Baskets, 409
Certificate, 48
Classes, 51
Common, 51
Convertible
preferred, 493
Dividends, 51
Par value, 51
Picture, 52
Preferred, 52
Restricted, 196
Voting rights, 51
Warrants, 463
Stock Exchange
Automeated Quote
System, 162
Stock Exchange
Electronic
Transaction
Service, 163
Stop. See Stop loss
Stop loss, 168, 308
Straddle, 431
Street name, 168
Strike ECN, 162
Strike price, 417
Strip, 400
Bond, 85
Stripping
Bond, 85
Subsidiary, 48, 52,
54, 197, 497, 642
Suburban soccer
mom, 215
SUE. See
Standardized
Unexpected
Returns
Sun Tzu, 1101
Sunk cost effect, 818
Super DOT, 162
Super Fresh, 685
Super-conductor, 960
Support, 660
Supreme Court, 203,
204
Surabaya, 842
Swap
Bond, 790
Commodity, 482
Currency, 482
Default, 483
Equity, 484
Interest rate, 468
swap agreement, 469
Swap transactions,
467
Swaps, 467
Symbol
Security, 163
Syndicate
Crime, 832
Underwriting, 57
Synthetic, 423
T
T + 3, 205
Taiwan, 850
Taiwanese dollar, 689
Takeover, 30, 54, 90,
186
and fairness, 199
Arbitrage, 375,
493
Cash tender, 504
Contested, 494
Friendly, 494
Hostile, 494
TANDEM, 415
Tanzania, 901
Tape
Consolidated, 158
TASI, 176, 849
Tax
and Foreign
Investment,
892
Progressive, 939
Tax shelter, 939
Taxes, 936
Deferred, 608,
640, 940
taxi medallion model,
332
Taylor expansion,
1020
Taylor Expansion,
453
Taylor Theorem, 232
Taylor’s Theorem,
1020
Tbilisi, 308
T-bills, 42
T-bonds, 42
t-distribution, 302
Tear sheets, 590
Technical analysis.
See Analysis,
Technical
Technical Market
Analysis, 236
TED, 415
Tel Aviv, 308, 841
Telecommunications,
875
Telex machines, 162
Temperature, 219,
575
Tempered
distribution, 547
Templeton, 894
Tender offer, 195,
496, 504
Tender Offer, 197
Dutch Auction,
497
Tensor, 1002
Product, 563, 797,
1002
TEPIX, 176
Term structure, 113
Texaco, 54, 837
Texas Oil Co., 54
Texas State Court of
Appeals, 55
Thai Baht, 905
Thailand, 845
The Street. See Wall
Street
Thinly-traded, 166
Third market, 161
Ticker
Symbol, 163
Tape, 171
Times interest earned,
597
Tobacco, 874
Tobin
James, 770
Tobin q-ratio, 610
Tobin, James, 258
Togo, 900
Tombstone ad, 57,
196
Tonalist school, 911
TOPIX, 176
Topological vector
space, 548
Locally convex,
583
Topology, 547
Tradebook ECN, 162
Trading
After hours, 170
Trading ahead, 186
Trading Costs
in Foreign
Markets, 876
Trading halt, 170
Trading index, 651
Transfer agent, 165,
176, 205
Transferability, 53
Translation
invariance, 67,
250, 534, 995
Translation invariant,
995
Translation-invariant,
495
Translation-invariant
variable, 139, 230,
535, 574
Transport equation,
550
Transportation, 672,
831, 875, 965
Treasuries, 42, 237,
363
Treasury yield curve,
110
Tremont Advisors,
360, 894
Treynor, 947
Treynor, Jack, 260
TRIN, 652
Trinidad & Tobago,
844
Triple-A, 592
Triple-witching, 410
Triune brain, 811
Trust Indenture Act,
194
Filings, 196
Tulipmania, 818
Tunis, 900
Turkey, 844, 850
Turnover rate, 343
Turnover Rate, 870
Tyco, 838
U
U. S. Supreme Court,
55
U.S. v. O’Hagan, 204
Uganda, 901
Ukraine, 846
Underwriter, 57
Unit investment trust,
335
United Technologies,
173
Upstairs, 165
Uptick Rule, 433
Uruguay, 844
Utility, 286
and risk aversion,
713
Company, 52, 497
Indifference
curves, 715
Investor, 237
Marginal, 715
Quadratic, 715
V
Valencia, 895
Value added, 683
Value Line, 590
Value stock
Fund, 352
Index fund, 506
Vangaurd, 340
Vanguard, 893
Varadzin Exchange,
897
Variance, 224, 564,
1043
Of expected
return, 227
Residual, 247,
1050
Vector, 251, 994
Dual space, 999
Inner product, 251
Space, 542, 996
Venezuela, 843
Venice, 298
Venture capital, 364
Verizon
Communications,
173
Vertical spread, 430
Virtual
Composite
security, 488,
489
Funds flow, 538
Position, 539, 795
Processes, 585
Riskless portfolio,
792
Riskless position,
447, 450
Synthetic security,
539
Warrant, 487
VISX, 190
VIX index, 652
Volatility, 224, 228,
434
Implied, 507
Index, 652
Voltage, 529
Volume, 86, 164, 232,
235, 507, 518,
589, 616, 649,
660, 669, 793
Volume indicators,
649
Volume spike
compression, 648
Vote, 51
Probability, 217
Space, 757
Welch, Jack, 823
West African
Monetary Union,
900
West African
Regional
Exchange, 900
WFE. See World
Federation of
Exchanges
When-issued, 214,
497
White knight, 495
Wholesale price
index, 8
Wiener Börse, 841
WIG Index, 176
Wilshire 5000, 175
Working capital
turnover, 597
World Equity
Benchmark
Securities, 505
World Federation of
Exchanges, 892
World GDP, 840
WorldCom, 824
Writing, 417
Zacks Investment
Service, 313
Zagreb, 845
Zambeef, 872
Zambia, 872
ZCB. See Zero
Coupon Bond
Zero sum game, 4, 75,
235, 333, 589,
613, 917
Zero-coupon bond,
152, 611
Zero-risk, 133
Zeta, 615
Zimbabwe, 902
Z-score, 615
Α
α
SCL Coefficient,
260
Β
β, 260
W
X
Wall Street, 176
The movie, 928,
930
Wall Street Journal,
198, 313
Briefing books,
615
Wall Street Week,
314
Wal-Mart, 173
Walt Disney, 173
WAMU. See West
African Monetary
Union
Warrant, 463, 487,
488, 508, 539, See
Stock warrant
Warren, Justice, 200
Warsaw Stock
Exchange, 904
Wash sale, 190
Water, 960
Waxel, Stanley, 203
WEBS, 510, 893,
903, See World
Equity Benchmark
Securities
Weight
Potfolio, 731
Xerox, 836
Γ
Γ
Option, 453
Y
Y2K, 863
Y-2K, 835
Yahoo, 109, 262
Yield
Curve, 113
Pick-up, 471
Yield curve, 103, 110,
113
Yield pick-up, 471
Yield to maturity, 83,
610
York Peppermint
Patty, 18
ytm, 489, See, also
YTM, Yield to
maturity
YTM, 83, 136, 501,
780, 783, See
Yield to maturity
Ρ
Z
Δ
Δ
Option, 453
Θ
Θ
Option, 453
Κ
Κ
Option, 453
Μ
μ, 562
ρ
Correlation
Coefficient,
250
Option, 453
Σ
σ, 224
Σ, 23
σ-algebra, 562