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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 .
On the other hand, bonds and other short-term fixed income securities tend to be a better option for short-term goals because they are typically less volatile than stocks and can help generate ...
Speculative demand is the holding of real balances for the purpose of avoiding capital loss from holding bonds or stocks. The net return on bonds is the sum of the interest payments and the capital gains (or losses) from their varying market value. A rise in interest rates causes aftermarket bond prices to fall, and that implies a capital loss ...
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 ...
Transformation problem: The transformation problem is the problem specific to Marxist economics, and not to economics in general, of finding a general rule by which to transform the values of commodities based on socially necessary labour time into the competitive prices of the marketplace. The essential difficulty is how to reconcile profit in ...
In a primary market, new stock or bond issues are sold to investors, often via a mechanism known as underwriting. The main entities seeking to raise long-term funds on the primary capital markets are governments (which may be municipal, local or national) and business enterprises (companies).
Exchanges such as the New York Stock Exchange, London Stock Exchange, and Nasdaq Stock Market provide centralized, liquid secondary markets for investors who wish to buy or sell stocks that trade on those exchanges. Most bonds and structured products trade "over the counter", or by phoning the bond desk of one’s broker-dealer. Loans sometimes ...
Dedicated portfolio theory, in finance, deals with the characteristics and features of a portfolio built to generate a predictable stream of future cash inflows.This is achieved by purchasing bonds and/or other fixed income securities (such as certificates of deposit) that can and usually are held to maturity to generate this predictable stream from the coupon interest and/or the repayment of ...