0
votes
1answer
22 views

Break Even Point

Suppose that x thousand units of a product will be sold when the price is p(x) = 50 - 1.25x dollars per unit and the cost of producing x thousand units is C(x) = 20x + 100 thousand dollars. a) What ...
0
votes
0answers
51 views

Finding criteria for a household financial budget falsification

I’m working on a financial problem about budget of households. Households in a state fill a form about their net budget in every year and our insurance company investigate their financial status and ...
3
votes
1answer
57 views

Why is that a risk averse consumer buys the optimum insurance when there is actuarially fair insurance?

I've asked the same question at the Quantitative Finance StackExchange. Consider the following example: "As a risk-averse consumer, you would want to choose a value of x so as to maximize expected ...
0
votes
0answers
46 views

Put-Call-Parity of Asian Options

I could need some help with deriving the put-call-parity for asian options. Let $S_t$ be the price of the underlying asset at time $t$ and set $Y_t = \int_0^t S_t dt$. Then the payoff of an asian ...
2
votes
1answer
35 views

Arbitrage opportunity for call price set on avarage

I have the following problem. Let C(K) be the market price of a Option Call with respect to the strike K. Let $C(100) = \frac{C(110)+C(90)}{2}$, then show that there exists an arbitrage opportunity. ...
2
votes
2answers
88 views

Understanding basic stochastic differential equations

This is from a physics course in economics, the literature provides a bare minimum of mathematical explanations. I am trying to understand how to work with stochastic differential equations given in ...
0
votes
1answer
33 views

Short and long positions of call options

I am on part c), and I want to know: Since I am the seller of this call option, I sold it for 0.44, and the option is worth 1 dollar at expiration. Assuming the buyer wants to make profit he will ...
0
votes
1answer
31 views

Forward contracts

How do I do this one? I'm assuming it's not as simple as "the initial value is just $50 since thats what the stock sells at"
0
votes
1answer
19 views

Difference Between Generalized and Alternative Compounded Interest Equations

I am currently studying a chapter called "An Economic Interpretation of e" in my Economics class and we are finding amounts of compounded interest. I am not actually looking for help on the problems ...
2
votes
0answers
109 views

Engineering Economics Cash Flow Diagram

I have the following question and solution below. What I don't understand is why is the 100,000 seen as savings/revenue when clearly it is coming out of pocket? Additionally, the monthly loan payment ...
0
votes
0answers
21 views

Accounting for social costs in a CBA

I am writing a report regarding the cost-benefit analysis of installing a wind turbine. The report takes into account market (i.e.cost of purchasing the turbine) and non-market costs and benefits ...
1
vote
1answer
55 views

Math / Accounting problem

I have been stuck for over an hour with the following problem. In my textbook the following is written: "Suppose, for example, that Polany Manufacturing Company enters into a long-term lease July 1 ...
0
votes
1answer
61 views

A doubt about Evans and Jovanovic (1989) economic model for entrepreneurs with credit constraints

In Evans and Jovanovic (1989) you will find a model for entrepreneurs with credit constraints. The part that is important for my question follows. Here it is the production function and the income ...
8
votes
1answer
261 views

Modelling risk when market making

I'm interested in learning about algorithmic trading, particularly in bitcoin. Looking at this chart, I can see that I could simultaneously offer a bid that was slightly higher than the highest ...
0
votes
1answer
77 views

Portfolio which replicates given payoff

Consider the following payoff function: $$p(S_T) = \begin{cases} 0 & \text{if } S_{T} \leq 70 \\ S_{T}-70 & \text{if } S_{T} \in (70; 100] \\ -S_{T}+120 & \text{if } S_{T} \in (100; 120] ...
0
votes
1answer
64 views

Find the transaction cost-adjusted expected return of the stock

Let $W^b_i$ denote the weight of stock i in the existing portfolio and $W^a_i$ denote the weight of stock i in the new portfolio to be created. Let $c_i$ denote the transaction cost of stock $i$. If ...
1
vote
2answers
241 views

Profit and Loss calculation: Fake currency

A store buys an item for $\$50$. They price it then, at $\$80$ ($\$30$ profit margin). A customer buys the item from them with a fake $\$100$ note. The store returns $\$20$ to the customer. My ...
0
votes
0answers
503 views

Net Present Value Calculation for Construction Project with Initial Capital

I'm having real trouble working out how to do the following question because of the initial capital that the company has at the start of the project, meaning that they can delay taking out a loan ...
1
vote
1answer
110 views

Net Present Worth Calculation (Economic Equivalence)

I'm currently doing some work involving net present worth analyses, and I'm really struggling with calculations that involve interest and inflation, such as the question below. I feel that if anyone ...
0
votes
2answers
252 views

Portfolio Optimization Problem Without Correlation Info

I received this interesting problem from a friend today: Assume that you are a portfolio manager with $10 million to allocate to hedge funds. The due diligence team has identified the following ...
2
votes
1answer
552 views

Statistics with overlapping periods

I've been having a lot of discussions about finance recently in which people will point to some results using overlapping time periods and claim a high degree of statistical significance. For ...
10
votes
1answer
371 views

A (mathematically) sound investment strategy

It is common wisdom in the investment community that a long-term investor saving for his future would do well to invest in high-risk/high-return assets when he is young, slowly switching his portfolio ...
0
votes
1answer
148 views

Optimizing Group Spending

I have always thought that groups of individuals that spend more money(as opposed to save) have more money in the long run. My reasoning is that if a particular group spends money, then each dollar ...