Financial Decision Making Under Uncertainty

Financial Decision Making Under Uncertainty

1st Edition - September 28, 1977

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  • Author: ANDERSON WEBSTER
  • eBook ISBN: 9781483294995

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Description

Financial Decision Making under Uncertainty presents the increasing application of the approach to financial decision making under uncertain to a myriad of practical problems. This book provides information pertinent to the fundamental aspects of financial theory. Organized into five parts encompassing 13 chapters, this book begins with an overview of formulating a problem as a linear program. This text then discusses the highlights of the theoretical and empirical analysis and then uses the same analytical framework to obtain results on the effect of inflation on the market price of risk. Other chapters consider meaningful utility functions for individual households that can be combined to construct an aggregate demand function for risky assets. This book discusses as well the formulation of the capital expenditure problems. The final chapter examines the case where the regulatory constraint is continuously enforced. This book is a valuable resource for advanced undergraduate and graduate students in financial theory.

Table of Contents


  • List of Contributors

    Preface

    Part I Utility and Risk Analysis

    An Algorithm for Finding Undominated Portfolios

    I. Introduction

    II. An Alternate Criterion for Dominance

    III. The Algorithm

    References

    The Strong Case for the Generalized Logarithmic Utility Model as the Premier Model of Financial Markets

    I. Introduction

    II. The Generalized Logarithmic Utility Model

    III. Financial Choice

    IV. Financial Equilibrium

    V. Financial Efficiency

    References

    Part II Investment Decisions Under Uncertainty

    The Demand for Risky Assets: Some Extensions

    I. Introduction and Summary

    II. Determinants of Market Price of Risk: Theoretical Background

    III. Determinants of Market Price of Risk: Statistical Tests

    IV. Market Price of Risk and Inflation

    References

    Optimal Timing of Capital Expenditures

    Introduction

    I. Replacement Model

    II. Simplification of the Model

    III. Generality of the Replacement Model

    IV. Numerical Illustrations

    V. The General Model

    VI. Concluding Observations

    References

    Leasing, Buying, and the Cost of Capital Services

    I. Introduction

    II. The Neoclassical Analysis for the Certainty Case

    III. The Extension to Allow for Uncertainty

    IV. The Impact of Taxes on the Rent-or-Buy Decision

    V. The Impact of Tax Subsidies and Tax Exemptions

    VI. Summary

    References

    Part III Portfolio Analysis and Capital Market Theory

    The Capital Asset Pricing Model: A "Multi-Beta" Interpretation

    I. Introduction

    II. The Multi-Beta Interpretation

    III. A Multifactor Model

    IV. A Discrete-State Model

    V. Expected Returns

    VI. Historic Betas, Ex Ante Betas, and Actual Returns

    VII. Measurement of Factors

    References

    Portfolio Efficiency Analysis in Three Moments: The Multiperiod Case

    References

    Equivalence among Alternative Portfolio Selection Criteria

    I. Introduction

    II. Mathematical Definitions and Comprehensive Theorem

    III. Comments and Additional Results

    References

    Part IV Inflation and Financial Decisions

    The Superfund: Efficient Paths Toward Efficient Capital Markets in Large and Small Countries

    I. Introduction and Summary

    II. Theoretical Foundations

    III. Pragmatics: Some Basic Considerations

    IV. Taking Cognizance of the Nitty Gritty of Investment Decision Making

    V. Some Implications of S*

    VI. Nominal Returns versus Deflated Returns

    VII. Multiperiod Extensions

    VIII. Concluding Remarks

    References

    Part V Applications of Risk Analysis

    Default Risk and the Demand for Forward Exchange

    I. Introduction

    II. The Model and the Optimality Conditions

    III. The Demand Schedules

    IV. Equilibrium with Homogeneous Expectations

    V. Summary and Concluding Remarks

    References

    Optimal Coupon Rate, Taxes, and Collusion Between Borrower and Lender

    I. Assumptions

    II. The Analysis Under Certainty

    III. Collusion Under Uncertainty

    IV. Summary and Concluding Remarks

    References

    An Optimal Screening Policy for R & D Projects

    I. Introduction

    II. The R & D Process

    III. A Definition of Screening Performance

    IV. The Model

    V. Optimization with Fixed Budget

    References

    Optimal Investment and Financing Patterns Under Alternative Methods of Regulation

    Introduction

    I. The Basic Structure

    II. Analysis When Regulation Is Continuously Enforced

    III. Analysis with Regulatory Lag

    IV. Conclusion

    References

    Author Index

    Subject Index

Product details

  • No. of pages: 301
  • Language: English
  • Copyright: © Academic Press 1977
  • Published: September 28, 1977
  • Imprint: Academic Press
  • eBook ISBN: 9781483294995

About the Author

ANDERSON WEBSTER

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