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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 .
Time value of money problems involve the net value of cash flows at different points in time. In a typical case, the variables might be: a balance (the real or nominal value of a debt or a financial asset in terms of monetary units), a periodic rate of interest, the number of periods, and a series of cash flows. (In the case of a debt, cas
One problem facing practitioners is the comparison of LGD estimates (usually averages) arising from different time periods where differing default definitions have been in place. The following formula can be used to compare LGD estimates from one time period (say x) with another time period (say y): LGD y =LGD x *(1-Cure Rate y)/(1-Cure Rate x)
Given a collection of pairs (time, cash flow) representing a project, the NPV is a function of the rate of return. The internal rate of return is a rate for which this function is zero, i.e. the internal rate of return is a solution to the equation NPV = 0 (assuming no arbitrage conditions exist).
if not, iteratively solve (initially using an approximation) such that the price of the instrument in question is output exactly when calculated using the curve (note that the rate corresponding to this instrument's maturity is solved; rates between this date and the previously solved instrument's maturity are interpolated)
In the United States, 30-day yield is a standardized yield calculation for bond funds.The formula for calculating 30-day yield is specified by the U.S. Securities and Exchange Commission (SEC). [1]