Dec
11
More gloom and doom for the holiday season – historian Niall Ferguson for Newsweek:
This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America’s debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president’s first term should be the administration’s most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn’t come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power. [link]
By the way, Happy Hannukah!
Dec
11
Executive compensation change at Goldman:
Goldman Sachs Group said Thursday its management committee will be receiving its bonus in the form of “shares at risk” in 2009 instead of cash. The shares at risk cannot be sold for five years and include other restrictions. “Discretionary compensation represents the vast majority of senior management’s compensation and is directly tied to the firm’s overall performance,” Goldman Sachs said in a statement. [link]
Dec
11
From The Economist’s Free Exchange blog:
RUSSIA was never an emerging market in the same mold as Brazil, China, and India, but the differences between the former and its acronymous partners have become crystal clear during the global recession. China’s statistics bureau reported today that Chinese industrial production grew by 19.2%, year-over-year, in November. Imports were up nearly 27%. And at present, China’s output growth in the third quarter was clocked at 8.9%.
Russia’s output also shifted 8.9%, year-on-year, in the third quarter. The shift just happened to be in the other direction. That’s an improvement from the 10.2% second quarter decline, but it’s still pretty awful. Forget the BRICs; Russia and Eastern Europe are forming their own exclusive club—of economies literally decimated by the financial crisis and global downturn. [link]
Dec
11
Shaky evidence and tenuous terrorist connections seemed to have worked in the past for an international invasion. So why not now?
Dec
10
HW 7 solutions are now posted. Please note the following:
- Do Problem 11.9, and NOT 11.10. The latter is about pricing puts using binomial trees, which we did not talk about. (If you’re interested, however, the only difference is that you go short on the stock and long on the calls for the riskless portfolio).
- Problem 11.12 is about two-step trees, since I said you are not responsible for these so treat it like a one-step tree. In particular, change the second sentence to read, “Over each of the next two three-month periods the next three months it is expected to go up by 6% or down by 5%.“
Enjoy, and see you in class on Tuesday.
Dec
08
Slides are posted. See you in class.
Dec
01
Slides are posted for today’s class. See sidebar to the right.
See you in class.
Nov
21
Preliminary slides for Tuesday’s class have been posted, along with a few handouts that we’ll be using. Sorry, I’m running slow this week. I’ll update the slides as soon as they are ready.
Update (Sunday, 5:06pm): Slides have been updated, and HW solutions have been posted.
Second Update (Monday, 9:22am): All slides and handouts for tomorrow’s class are up.
Nov
18
I’ve uploaded the slides which were not present earlier, so all the slides from yesterday are online.
Also, just a note about yesterday’s spreadsheet on expected futures risk. The spreadsheet is correct. The implied futures price (F0, which is known at time 0) does not change for the three different betas. The expected return changes along with the beta and keeps F0 constant, even though the expected spot price (E(ST), which is not known at time 0) changes.
The team that spotted this point will not have its point deducted. Again, F0 will not change for changes in E(ST), simply because the expected return increases or decreases in relation to the risk-free rate, and ensures that F0 is constant.
If you have any questions on this, feel free to drop me a line.
