Business Risk Management
In problem set 2, question 1, you are asked to calculate the expected value of a game based upon the roll of 3 dice. You pay $1 to participate in this game, and receive payoffs of 1) $4 if a number that you select appears on a 3 dice, 2) $3 if a number that [...]
Since George’s apparently won’t be featuring the SOTU Address on their flat panel televisions, the next best venue in Waco for watching the SOTU tonight is in Cashion 309 (starting at 8 p.m.). Economics professor John Pisciotta and political science professor Gayle Avant are hosting a State of the Union Address Watch “Party” and discussion. [...]
Here is an interesting and timely Wall Street Journal article about the relationship between market returns and the CBOE Volatility Index, AKA the “VIX”. Not surprisingly (in view of the discussion that we have already had in class; see pp. 14-17 of http://fin4335.garven.com/spring2012/lecture1.pdf), since VIX has declined 20% year to date, broad [...]
The birthday paradox pertains to the probability that in a set of randomly chosen people, some pair of them will have the same birthday. Counter-intuitively, in a group of 23 randomly chosen people, there is slightly more than a 50% probability that some pair of them will both have been born on the same day. For [...]
Throughout the course of this semester, we’ll be studying models of managing (and pricing) risk that are based largely upon the assumptions that 1) human behavior is “rational” and that 2) markets are informationally efficient. These assumptions have recently come under attack in the academic and in the public policy arenas; [...]
Here are two particularly informative essays on private equity (published by the American Enterprise Institute) by Steve Kaplan, who is the Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business and one of the foremost scholars on the topic of private equity (note: for [...]
I just posted a new (and succinct) teaching note entitled “Normal and Standard Normal Distribution“. I highly recommend that y’all read this because it goes through the math and intuition connecting the normal distribution with the standard normal distribution. This note also provides examples of how this all applies in a practical setting; [...]
In class on Tuesday, I create a spreadsheet in class which numerically illustrated a Taylor expansion of the function y = exp(x) around x = 0 (see pp. 29-35 of the Mathematics Tutorial lecture note for more details). I promised that I would post this spreadsheet, so here it is:
Quoting from this article, “Two major academic studies published in 2011 allow us to examine the record of a broad swath of private equity (PE) firms on the two key questions: returns to investors and job creation.” The first study (cf. http://ssrn.com/abstract=1932316) documents that the record for returns to investors [...]
