Download or read book Investment and Arbitrage Opportunities with Short Sales Constraints written by Elyes Jouini and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we consider a family of investment project defined by their deterministic cash flows. We assume stationarity - that is, projects available today are the same as those available in the past. In this framework, we prove that the absence of arbitrage opportunities is equivalent to the existence of a discount rate such that the net value is equal to zero otherwise. Our result allows for an infinite number of projects and for continuous as well as discrete cash flows, generalizing similar results established by Cantor et lippman (1983,1995) and Andler and gales (1997) in a discrete time framework and for a finite number of project.

Download or read book Investment Opportunities Short Sales Constraints and Arbitrage Opportunity written by Centre de recherche en économie et statistique (Paris, France) and published by . This book was released on 1995 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Index Arbitrage Opportunities and Short Sales Constraints written by Joseph K. W. Fung and published by . This book was released on 1998 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Arbitrage and Investment Opportunities written by Elyes Jouini and published by . This book was released on 2015 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a model in which all investment opportunities are described in terms of cash flows. We don't assume that there is a numeacute;raire, the time horizon is not supposed to be finite, the investment opportunities are not specifically related to the buying and selling of securities on a financial market. In this quite general framework, we show that the assumption of no-arbitrage is essentially equivalent to the existence of a quot;discount processquot; under which the quot;net present valuequot; of any investment is nonpositive. Since most market imperfections, such as short sale constraints, convex cone constraints, proportional transaction costs, no borrowing or different borrowing and lending rates, etc., can fit in our model for a specific set of investments, we then obtain a characterization of the no-arbitrage condition in these imperfect models, from which it is easy to derive pricing formulae for contingent claims.Compared with existing results, our approach allows to consider markets with no numeacute;raire or with a numeacute;raire that is subject to constraints. Besides, we introduce a notion of no-free lunch which is less restrictive than the usual one. Last, we characterize the assumption of no-arbitrage (or no-free lunch) for more general investment opportunities, which enables us to consider investments that are not necessarily related to a market model and, more interestingly, to generalize the results obtained for imperfect markets and to obtain them all in a unified way.

Download or read book Short Selling written by Frank J. Fabozzi and published by John Wiley & Sons. This book was released on 2004-11-17 with total page 434 pages. Available in PDF, EPUB and Kindle. Book excerpt: The latest theoretical and empirical evidence on short selling in the United States and throughout the world To get the most success out of what the finance community regards as a risky business, short sellers need high-level information. The Theory and Practice of Short Selling offers managers and investors the information they need to maximize and enhance their short selling capabilities for bigger profits. Frank Fabozzi collects a group of market experts who share their knowledge on everything from the basics to the complex in the world of short sales, including mechanics of short selling, the empirical evidence on short-selling, the implications or restrictions on short selling for investment strategies, short-selling strategies pursued by institutional investors, and identifying short-selling candidates. Frank J. Fabozzi, PhD, CFA (New Hope, PA), is the Frederick Frank Adjunct Professor of Finance at Yale University's School of Management and Editor of the Journal of Portfolio Management. He is the author or editor of over 100 books on finance and investing.

Download or read book Essays on Asymmetric Information and Trading Constraints written by György Venter and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contains three essays exploring the asset pricing implications of asymmetric information and trading constraints. Chapter 1 studies how short-sale constraints affect the informational efficiency of market prices and the link between prices and economic activity. I show that under short-sale constraints security prices contain less information. However, short-sale constraints increase the informativeness of prices to some agents who learn about the quality of an investment opportunity from market prices and have additional private information. This, in turn, can lead to higher allocative efficiency in the real economy. My result thus implies that the decrease in average informativeness due to short-sale constraints can be more than compensated by an increase in informativeness to some agents. In Chapter 2, I develop an equilibrium model of strategic arbitrage under wealth constraints. Arbitrageurs optimally invest into a fundamentally riskless arbitrage opportunity, but if their capital does not fully cover losses, they are forced to close their positions. Strategic arbitrageurs with price impact take this constraint into account and try to induce the fire sales of others by manipulating prices. I show that if traders have similar proportions of their capital invested in the arbitrage opportunity, they behave cooperatively. However, if the proportions are very different, the arbitrageur who is less invested predates on the other. The presence of other traders thus creates predatory risk, and arbitrageurs might be reluctant to take large positions in the arbitrage opportunity in the first place, leading to an initially slow convergence of prices. Chapter 3 (joint with Dömötör Pálvölgyi) studies the uniqueness of equilibrium in a textbook noisy rational expectations economy model a la Grossman and Stiglitz (1980). We provide a very simple proof to show that the unique linear equilibrium of their model is the unique equilibrium when allowing for any continuous price function, linear or not. We also provide an algorithm to create a (non-continuous) equilibrium price that is different from the Grossman-Stiglitz price.

Download or read book Understanding Arbitrage An Intuitive Approach To Financial Analysis written by Randall S. Billingsley and published by Pearson Education India. This book was released on 2006-09 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Short Selling Activities and Convertible Bond Arbitrage written by Sebastian P. Werner and published by Springer Science & Business Media. This book was released on 2010-12-01 with total page 269 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sebastian Werner examines aggregate short sales and convertible bond arbitrage, which is a typical hedge fund strategy that involves a significant short position in the underlying stock of a long convertible bond position for hedging purposes. He provides insightful and new observations of the significant difference in the trading pattern, information content and resulting impact on stock returns of arbitrage- versus valuation-based short selling activities.

Download or read book Arbitrage in securities markets with short sales constraints written by Elyès Jouini and published by . This book was released on 1994 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Understanding Arbitrage written by Randall Billingsley and published by Pearson Education. This book was released on 2005-10-05 with total page 243 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arbitrage is central both to corporate risk management and to a wide range of investment strategies. Thousands of financial executives, managers, and sophisticated investors want to understand it, but most books on arbitrage are far too abstract and technical to serve their needs. Billingsley addresses this untapped market with the first accessible and realistic guide to the concepts and modern practice of arbitrage. It relies on intuition, not advanced math: readers will find basic algebra sufficient to understand it and begin using its methods. The author starts with a lucid introduction to the fundamentals of arbitrage, including the Laws of One Price and One Expected Return. Using realistic examples, he shows how to identify assets and portfolios ripe for exploitation: mispriced commodities, securities, misvalued currencies; interest rate differences; and more. You'll learn how to establish relative prices between underlying stock, puts, calls, and 'riskless' securities like Treasury bills -- and how these techniques support derivatives pricing and hedging. Billingsley then illuminates options pricing, the heart of modern risk management and financial engineering. He concludes with an accessible introduction to the Nobel-winning Modigliani-Miller theory, and its use in analyzing capital structure.

Download or read book Selling Short written by Joseph A. Walker and published by John Wiley & Sons. This book was released on 1991-09-03 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt: Combines a history of short selling with current strategies and applications to present a complete guide to this increasingly popular investment tool. Procedural and regulatory requirements are mixed with actual case studies and examples that readers can apply to specific situations. Risks and rewards of short selling are discussed in detail as are short selling as a tool for protecting other investments and for speculation.

Download or read book Why are Most Funds Open end written by Jeremy C. Stein and published by . This book was released on 2004 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: The majority of asset-management intermediaries (e.g., mutual funds, hedge funds) are structured on an open-end basis, even though it appears that the open-end form can be a serious impediment to arbitrage. I argue that the equilibrium degree of open-ending in an economy can be excessive from the point of view of investors. When funds compete for investors' dollars, they may engage in a counterproductive race towards the open-end form, even though this form leaves them ill-suited to undertaking certain types of arbitrage trades. One implication of the analysis is that, even absent short-sales constraints or other frictions, economically large mispricings can coexist with rational, competitive arbitrageurs who earn small excess returns.

Download or read book Investors optimal response to stock price bubbles written by Maximilian Wegener and published by GRIN Verlag. This book was released on 2013-04-08 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2013 in the subject Business economics - Investment and Finance, grade: 8.0, Maastricht University, language: English, abstract: According to the efficient market hypothesis there should not be an asset overvaluation. Nevertheless, bubbles appear from time to time in the real world. In a financial bubble, the price of a security deviates grossly from its fundamental intrinsic value (Watanabe, Takayasu & Takayasu, 2007). Fundamentals or fundamental value refer to economic variables such as discount rates or future cash flows (Siegel, 2003). Depending on the valuation technique one can define an asset’s intrinsic or fundamental value, based on economic variables and assumed growth. A financial bubble is defined as a price run-up, where an initial price rise generates positive expectations of higher future prices, which attracts new buyers that are rather interested in reaping profits by trading the assets than using its earnings capacity (Siegel, 2003). There is a long history of bubbles such as the 1720 South Sea bubble, 1929 the Great Crash, in the mid-1970s the REIT bubble, in 1987 the housing crash, in 1991 the banking crisis, in 2002 the NASDAQ technology bubble and just recently the housing bubble in the United States, just to name a few. This capstone assignment deals with the question of how investors should act in the case of asset overvaluation in financial markets. In particular, it tries to answer how investors should behave. The central question asks whether investors should step aside and wait until the bubble bursts, whether they should ride the bubble or trade against it. Of course, there is support for all three, albeit contradicting theories. The different trading and investment strategies are reviewed, thereby touching upon various asset bubbles, financial concepts and empirical evidence in the academia. Moreover, it is elaborated on positive feedback trading and rational speculations, as well as behavioral finance concepts such as herding or overconfidence. The remainder of this paper describes different concepts outlined in the empirical literature, starting with asset overvaluation, followed by the efficient market hypothesis and the random walk phenomenon. The role of arbitrage traders is explored, and their impact on efficient markets and bubbles discussed. A review of behavioral traits during bubbles and the impact of human behavior on asset prices is included. Further, there is an examination of mutual fund strategies and their success in exploiting profit opportunities during bubbles. Finally, it is summarized which arguments support each of the viewpoints.

Download or read book Efficiently Inefficient written by Lasse Heje Pedersen and published by Princeton University Press. This book was released on 2019-09-17 with total page 368 pages. Available in PDF, EPUB and Kindle. Book excerpt: Efficiently Inefficient describes the key trading strategies used by hedge funds and demystifies the secret world of active investing. Leading financial economist Lasse Heje Pedersen combines the latest research with real-world examples and interviews with top hedge fund managers to show how certain trading strategies make money--and why they sometimes don't. Pedersen views markets as neither perfectly efficient nor completely inefficient. Rather, they are inefficient enough that money managers can be compensated for their costs through the profits of their trading strategies and efficient enough that the profits after costs do not encourage additional active investing. Understanding how to trade in this efficiently inefficient market provides a new, engaging way to learn finance. Pedersen analyzes how the market price of stocks and bonds can differ from the model price, leading to new perspectives on the relationship between trading results and finance theory. He explores several different areas in depth--fundamental tools for investment management, equity strategies, macro strategies, and arbitrage strategies--and he looks at such diverse topics as portfolio choice, risk management, equity valuation, and yield curve logic. The book's strategies are illuminated further by interviews with leading hedge fund managers: Lee Ainslie, Cliff Asness, Jim Chanos, Ken Griffin, David Harding, John Paulson, Myron Scholes, and George Soros.

Download or read book Investment Philosophies written by Aswath Damodaran and published by John Wiley & Sons. This book was released on 2012-06-22 with total page 615 pages. Available in PDF, EPUB and Kindle. Book excerpt: The guide for investors who want a better understanding of investment strategies that have stood the test of time This thoroughly revised and updated edition of Investment Philosophies covers different investment philosophies and reveal the beliefs that underlie each one, the evidence on whether the strategies that arise from the philosophy actually produce results, and what an investor needs to bring to the table to make the philosophy work. The book covers a wealth of strategies including indexing, passive and activist value investing, growth investing, chart/technical analysis, market timing, arbitrage, and many more investment philosophies. Presents the tools needed to understand portfolio management and the variety of strategies available to achieve investment success Explores the process of creating and managing a portfolio Shows readers how to profit like successful value growth index investors Aswath Damodaran is a well-known academic and practitioner in finance who is an expert on different approaches to valuation and investment This vital resource examines various investing philosophies and provides you with helpful online resources and tools to fully investigate each investment philosophy and assess whether it is a philosophy that is appropriate for you.

Download or read book Short Selling written by James Clunie and published by Harriman House Limited. This book was released on 2013-09-20 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: What is short-selling? And is it as profitable - or as dangerous - as it can seem? In this highly focused eBook, financial expert and author James Clunie reveals everything you need to know about the art of short-selling without wasting your time. Cutting to the quick, it lays bare: - all major short-selling techniques: quantitative, forensic accounting, thematic investing, fair value analysis, balance sheet weakness/financial distress, and exploiting market ecology - the advantages and disadvantages of each short-selling approach, and their rates of success and failure - where short-sellers get their information from - how short-sellers try to practise risk management and much more! With a low-growth atmosphere and markets still nervous in the wake of recent financial crises, there has never been a better time to get on top of what it means to be a successful short-seller. Short Selling by James Clunie is the most time and cost-effective way to start getting ahead of other traders and investors now.

Download or read book The Art of Short Selling written by Kathryn F. Staley and published by John Wiley & Sons. This book was released on 1996-12-23 with total page 311 pages. Available in PDF, EPUB and Kindle. Book excerpt: A one-of-a-kind book that shows you how to cash in on the latestinvesting trend--short selling "The Art of Short Selling is the best description of this difficulttechnique."--John Train, Train, Thomas, Smith Investment Counsel,and author of The New Money Masters "Kathryn Staley has done a masterful job explaining the highlyspecialized art of short selling. Her approach to telling the truestories of famous investment 'scams' will keep the readerspellbound, while teaching the investor many cruciallessons."--David W. Tice, Portfolio Manager, Prudent BearFund "Selling short is still a misunderstood discipline, but even themost raging bull needs to know this valuable technique to masterthe ever-changing markets."--Jim Rogers, author, InvestmentBiker On the investment playing field, there is perhaps no game moreexciting than short selling. With the right moves, it can yieldhigh returns; one misstep, however, can have disastrousconsequences. Despite the risk, a growing number of players areanteing up, sparked in part by success stories such as that ofGeorge Soros and the billions he netted by short selling theBritish pound. In The Art of Short Selling, Kathryn Staley, anexpert in the field, examines the essentials of this importantinvestment vehicle, providing a comprehensive game plan with whichyou can effectively play--and win--the short selling game. Whether used as a means of hedging bets, decreasing the volatilityof total returns, or improving returns, short selling must behandled with care--and with the right know-how. As Staley pointsout, "Short selling is not for the faint of heart. If a stock movesagainst the position holder, the effect on a portfolio and networth can be devastating. Investors need to understand the impacton their accounts as well as the consequences of getting bought inbefore they indulge in short selling." The Art of Short Sellingguides you--clearly and concisely--through the ins and outs of thishigh-risk, high-stakes game. The first--and most important--move in selling short is to identifyflaws in a business before its share prices drop. To help youtackle this key step, Staley shows you how to evaluate companyfinancial statements and balance sheets, make sense of returnratios, detect inconsistencies in inventory, and analyze thestatement of cash flows. Through real-world examples thatillustrate the shorting of bubble, high multiple growth, and themestocks, you'll proceed step by step through the complete processand learn to carry out all the essentials for a successful shortsell, including quantifying the risk factor and orchestratingcorrect timing, as well as implementing advanced valuationtechniques to execute the sell/buy. Packed with landmark, cutting-edge examples, up-to-the-minuteguidelines, and pertinent regulations, The Art of Short Selling isa timely and comprehensive reference that arms you with thenecessary tools to make a prepared and confident entrance onto theshort selling playing field.