Arbitrage

Modigliani and Miller (1958) provided a new theory of capital structure, suggesting that a firm’s choice between debt and equity has no impact on the firm’s value. This became known as irrelevance theorem. However, this theory is surrounded by a number of assumptions that can be analyzed in turn. The first assumption from Modigliani and Miller (1958) is that firms operate within a perfect capital market. The perfect capital market is defined by Fabozzi, Neave and Zhou (2012, p 87). Firstly,…

i. Abstract The objective of this paper is to construct and analyse the Fama and French three-factor model for the UK market. We will then be comparing the three-factor model to the slightly modified; Fama-French and Carhart’s four-factor model. The purpose of this paper is to find evidence, if any, of the validity of these multifactor models in the UK market. Previous research suggests that the search for a more convincing asset pricing model remains (Gregory, Tharyan and Christidis, 2011).…

What are the factors affecting the prices of options? Explain the assumptions in the Black-Scholes model. In order to understand the factors that affect the prices of options, we need to understand what options are and how they work. Options are derivative assets. According to a California-based company called Optionetics (website: www.optionetics.com), "options are the most versatile trading instruments ever invented". This means, that you aren 't limited to making a profit only when the market…

To answer the question “why do people migrate” it would take us a lot of time just because people migrate for many different reasons. If we have a closer look to the second questions which is “why don't people migrate more”, it’s also a questions that has many different answers. The first couple of answers that I have for both of these questions, come from how people from my country (Albania) think. Considering Albania a country with a lot of corruption in the government and with a poor economy,…

combined with the increase in systematic risk, greatly increased the overall market risk of the studied firms (Homan 2009). The increased volatility that resulted from this increased risk then in turn caused a reduction in, “trading activity and market arbitrage” (Homan…

Question 1 – ASSET ALLOCATION The following report and its contents outline the asset allocation of charity X to be submitted on 25th May 2015. Strategy Overview A balanced asset allocation has been formulated with Australian and US equities, as well as cash and government bonds. This medium-term investment strategy will generate the best possible (while conservative) rate of return. In order to ensure that we achieve a well-diversified allocation in terms of securities and global market…

At the beginning of the period, the price of Computers, Inc. divided by the industry index was 0.39; by the end of the period, the ratio had increased to 0.50. As the ratio increased over the period, it appears that Computers, Inc. outperformed other firms in its industry. The overall trend, therefore, indicates relative strength, although some fluctuation existed during the period, with the ratio falling to a low point of 0.33 on day 19. 18. Five day moving averages: Days 1 – 5: (19.63 + 20 +…

Adding the risk-free government securities would result in a lower beta for the new portfolio. The new portfolio beta will be a weighted average of the individual security betas in the portfolio; the presence of the risk-free securities would lower that weighted average. q. The comment is not correct. Although the respective standard deviations and expected returns for the two securities under consideration are equal, the covariances between each security and the original portfolio…

Since then twenty new accounting standards were issued by the Ministry of Finance of the Russian Federation aiming to align accounting practices with IFRS. Despite these efforts essential differences between national accounting standards and IFRS remain. Since 2004 all commercial banks have been obliged to prepare financial statements in accordance with both national accounting standards and IFRS. Full transition to IFRS is delayed and is expected to take place from 2011. Singapore: In…

Chapter 5- Reward and Compensation Management This chapter explains the HRM function of reward and compensation and subsequently its impact on organizational performance. First, the reward and compensation as a concept is explained then we advance to elaborating on the reward and compensation strategy at Genpact. After establishing the background and the given framework the chapter investigates the strategic integration and then the major elements of reward and compensation integration and…