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Merton's portfolio problem is a problem in continuous-time finance and in particular intertemporal portfolio choice. An investor must choose how much to consume and must allocate their wealth between stocks and a risk-free asset so as to maximize expected utility .
Megalodon: The Monster Shark Lives is a 2013 film that aired on the Discovery Channel about the potential survival of the prehistoric shark. Purported to be a documentary, the story revolves around numerous videos, "photographs", and firsthand encounters with a megalodon and an ensuing investigation that points to the involvement of the prehistoric species, despite the long-held belief of its ...
The 60/40 rule is a fundamental tenet of investing. It says you should aim to keep 60% of your holdings in stocks, and 40% in bonds. Stocks can yield robust returns, but they are volatile.
For example, suppose the cash flows over a 7-year period are, respectively, $2, $2, $2, $50, $2, $2, $102. One could buy a $100 seven-year bond with a 2% annual coupon, and a four-year zero-coupon bond with a maturity value of 48. The market price of those two instruments (that is, the cost of buying this simple replicating portfolio) might be ...
Cheaper than buying individual bonds: The bond market is usually less liquid than the stock market, with wider bid-ask spreads costing investors more money. With a bond ETF, you can use the fund ...
A bond’s payment is called a coupon, and it will not change except as specified in the terms of the bond. On a fixed-rate bond, for example, the coupon might be 5 percent, so the bondholder ...
In finance, a holdout problem occurs when a bond issuer is in default or nears default, and launches an exchange offer in an attempt to restructure debt held by existing bond holders. Such exchange offers typically require the consent of holders of some minimum portion of the total outstanding debt, often in excess of 90%, because, unless the ...
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