Industry WIKI

Algorand is a proof-of-stake blockchain and cryptocurrency. Algorand's native cryptocurrency is called ALGO.

In financial economics, asset pricing refers to the formal development of the principles used in pricing, together with the resultant models. The treatment develops the interrelated paradigms of general equilibrium asset pricing and rational asset pricing, the latter corresponding to risk neutral pricing.

In mathematical finance, the Black–Derman–Toy model (BDT) is a popular short-rate model used in the pricing of bond options, swaptions and other interest rate derivatives; see Lattice model (finance) § Interest rate derivatives. It is a one-factor model; that is, a single stochastic factor—the short rate—determines the future evolution of all interest rates. It was the first model to com

A bought out deal is a method of offering company shares to the general public through a sponsor or underwriter (a bank, financial institution, or an individual). The securities are listed in one or more stock exchanges within a time frame mutually agreed upon by the company and the sponsor. This option saves the issuing company the costs and time involved in a public issue. The cost of

In economics, a budget constraint represents all the combinations of goods and services that a consumer (or other decision-maker) can purchase given current prices and a given level of income or wealth. In consumer theory, the budget constraint and a preference map (or system of indifference curves) are the basic tools used to analyse consumer choice. In the standard two-good case, the b

Credit market imperfections (known academically as capital market imperfections) are limitations that reduce the range of financial contracts that can be signed or honored. There are three main theoretical drivers of imperfection: First, lenders do not have full information about the borrower, whether they have the capacity to pay back their debt and/or whether they are willing to pay (a

In mathematics, the Chan–Karolyi–Longstaff–Sanders process (abbreviated as CKLS process) is a stochastic process with applications to finance. In particular it has been used to model the term structure of interest rates. The CKLS process can also be viewed as a generalization of the Ornstein–Uhlenbeck process. It is named after K. C. Chan, G. Andrew Karolyi, Francis A. Longstaff, and Ant

In finance, the Chen model is a mathematical model describing the evolution of interest rates. It is a type of "three-factor model" (short-rate model) as it describes interest rate movements as driven by three sources of market risk. It was the first stochastic mean and stochastic volatility model and it was published in 1994 by Lin Chen, PhD from Harvard, former economist of Federal Res

In economics, a complete market (a.k.a. Arrow-Debreu market or complete system of markets) is a market with two conditions:

Compound interest or anatocism is interest accumulated from a principal sum and previously accumulated interest. It is the result of reinvesting or retaining interest that would otherwise be paid out, or of the accumulation of debts from a borrower.

In mathematical finance, the constant elasticity of variance model (CEV) is a stochastic volatility model, although technically it would be classed more precisely as a local volatility model, that attempts to capture stochastic volatility and the leverage effect. The model is widely used by practitioners in the financial industry, especially for modelling equities and commodities. It was

In mathematical finance, the Cox–Ingersoll–Ross (CIR) model describes the evolution of interest rates. It is a type of "one factor model" (short-rate model) as it describes interest rate movements as driven by only one source of market risk. The model can be used in the valuation of interest rate derivatives. It was introduced in 1985 by John C. Cox, Jonathan E. Ingersoll and Stephen A.

A company's debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance the company's assets. Closely related to leveraging, the ratio is also known as risk ratio, gearing ratio or leverage ratio. The two components are often taken from the firm's balance sheet or statement of financial position (so-called book value

Dividend policy, in financial management and corporate finance, is concerned with

The dividend puzzle, as originally framed by Fischer Black,

Econophysics is a transdisciplinary research field in heterodox economics. It applies theories and methods originally developed by physicists to problems in economics, usually those including uncertainty or stochastic processes and nonlinear dynamics. Some of its application to the study of financial markets has also been termed statistical finance referring to its roots in statistical p

In monetary economics, the equation of exchange is the relation:

An expert system for mortgages is a computer program that contains the knowledge and analytical skills of human authorities, related to mortgage banking. Loan departments are interested in expert systems for mortgages because of the growing cost of labor which makes the handling and acceptance of relatively small loans less profitable. They also see in the application of expert systems a

In statistical mechanics and information theory, the Fokker–Planck equation is a partial differential equation that describes the time evolution of the probability density function of the position or velocity of a particle under the influence of drag forces and random forces, as in Brownian motion. The equation can be generalized to other observables as well. The Fokker–Planck equation h

The fundamental theorems of asset pricing (also: of arbitrage, of finance), in both financial economics and mathematical finance, provide necessary and sufficient conditions for a market to be arbitrage-free, and for a market to be complete. An arbitrage opportunity is a way of making money with no initial investment without any possibility of loss. Though arbitrage opportunities do exis

Gibson's paradox is the observation that the rate of interest and the general level of prices under the gold standard are positively correlated. It is named for British economist Alfred Herbert Gibson who noted the correlation in a 1923 article for Banker's Magazine. The correlation had been noted earlier by Thomas Tooke.

In probability theory, Girsanov's theorem or the Cameron-Martin-Girsanov theorem explains how stochastic processes change under changes in measure.

Greenshoe, or over-allotment clause, is the term commonly used to describe a special arrangement in a U.S. registered share offering, for example an initial public offering (IPO), which enables the investment bank representing the underwriters to support the share price after the offering without putting their own capital at risk. This clause is codified as a provision in the underwritin

In corporate finance, Hamada’s equation is an equation used as a way to separate the financial risk of a levered firm from its business risk. The equation combines the Modigliani–Miller theorem with the capital asset pricing model. It is used to help determine the levered beta and, through this, the optimal capital structure of firms. It was named after Robert Hamada, the Professor of Fi

In probability theory and statistics, a Hawkes process is an age-dependent branching process driven by immigration from an inhomogeneous Poisson process. The process, named after Alan G. Hawkes, is also called a self-exciting point process., i.e., the occurrence of an event increases the likelihood of another event occurring. It has arrivals at times

The Heath–Jarrow–Morton (HJM) framework is a general framework to model the evolution of interest rate curves – instantaneous forward rate curves in particular (as opposed to simple forward rates). When the volatility and drift of the instantaneous forward rate are assumed to be deterministic, this is known as the Gaussian Heath–Jarrow–Morton (HJM) model of forward rates. For direct mode

In finance, the Heston model, named after Steven L. Heston, is a mathematical model that describes the evolution of the volatility of an underlying asset. It is a stochastic volatility model: such a model assumes that the volatility of the asset is not constant, nor even deterministic, but follows a random process.

In financial mathematics, the Hull–White model is a model of future interest rates. In its most generic formulation, it belongs to the class of no-arbitrage models that are able to fit today's term structure of interest rates. It is relatively straightforward to translate the mathematical description of the evolution of future interest rates onto a tree or lattice and so interest rate de

In financial mathematics, the implied volatility (IV) of an option contract is that value of the volatility of the underlying instrument which, when input in an option pricing model (usually Black–Scholes), will return a theoretical value equal to the price of the option. A non-option financial instrument that has embedded optionality, such as an interest rate cap, can also have an impl

In economics, incomplete markets are markets in which there does not exist an Arrow–Debreu security for every possible state of nature. In contrast with complete markets, this shortage of securities will likely restrict individuals from transferring the desired level of wealth among states.

In finance and economics, interest is payment from a debtor or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct from a fee which the borrower may pay to the lender or some third party. It is also distinct from dividend which is paid by a company to its share

Itô calculus, named after Kiyosi Itô, extends the methods of calculus to stochastic processes such as Brownian motion (see Wiener process). It has important applications in mathematical finance, in stochastic differential equations, and more recently even in machine learning.

Jump diffusion is a stochastic process that involves jumps and diffusion. It is a type of Lévy process. It has important applications in magnetic reconnection, coronal mass ejections, condensed matter physics, and pattern theory and computational vision.

The Korn–Kreer–Lenssen model (KKL model) is a discrete trinomial model proposed in 1998 by Ralf Korn, Markus Kreer and Mark Lenssen to model illiquid securities and to value financial derivatives on these.

The LIBOR market model, also known as the BGM Model (Brace Gatarek Musiela Model, in reference to the names of some of the inventors) is a financial model of interest rates. It is used for pricing interest rate derivatives, especially exotic derivatives like Bermudan swaptions, ratchet caps and floors, target redemption notes, autocaps, zero coupon swaptions, constant maturity swaps and

In probability theory and related fields, Malliavin calculus is a set of mathematical techniques and ideas that extend the mathematical field of calculus of variations from deterministic functions to stochastic processes. In particular, it allows the computation of derivatives of random variables. Malliavin calculus is also called the stochastic calculus of variations. P. Malliavin firs

Martingale pricing is a pricing approach based on the notions of martingale and risk neutrality. The martingale pricing approach is a cornerstone of modern quantitative finance and can be applied to a variety of derivatives contracts, e.g. options, futures, interest rate derivatives, credit derivatives, etc.

Master data management (MDM) is a discipline in which business and information technology collaborate to ensure the uniformity, accuracy, stewardship, semantic consistency, and accountability of the enterprise's official shared master data assets.

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. The problem was formulated and solved by Robert C. Merton in 1969 both for finite lifetimes and for the infinite case. Rese

Minority discount is an economic concept reflecting the notion that a partial ownership interest may be worth less than its proportional share of the total business. The concept applies to equities with voting power because the size of voting position provides additional benefits or drawbacks. For example, ownership of a 51% share in the business is usually worth more than 51% of its equ

The Modigliani–Miller theorem (of Franco Modigliani, Merton Miller) is an influential element of economic theory; it forms the basis for modern thinking on capital structure. The basic theorem states that in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market, the enterprise value of a firm is unaffected by how that firm is finance

Monte Carlo methods are used in corporate finance and mathematical finance to value and analyze (complex) instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining the distribution of their value over the range of resultant outcomes. This is usually done by help of stochastic asset models. The advantage of Monte C

In statistics, a moving average (rolling average or running average or moving mean or rolling mean) is a calculation to analyze data points by creating a series of averages of different selections of the full data set. Variations include: simple, cumulative, or weighted forms.

In portfolio theory, a mutual fund separation theorem, mutual fund theorem, or separation theorem is a theorem stating that, under certain conditions, any investor's optimal portfolio can be constructed by holding each of certain mutual funds in appropriate ratios, where the number of mutual funds is smaller than the number of individual assets in the portfolio. Here a mutual fund refer

Net present value (NPV), also known as net present worth (NPW) is a method for assessing whether future amounts of money are worth more or less than the cost of an investment made today. It is widely used in finance, economics, and project evaluation to judge whether a planned activity is expected to create value. NPV works by converting future cash flows into their “present value,” reco

In mathematics, the theory of optimal stopping or early stopping is concerned with the problem of choosing a time to take a particular action, in order to maximise an expected reward or minimise an expected cost. Optimal stopping problems can be found in areas of statistics, economics, and mathematical finance (related to the pricing of American options). A key example of an optimal stop

Ouroboros is a family of proof-of-stake consensus protocols used in the Cardano and Polkadot blockchains. It can run both permissionless and permissioned blockchains.

The following outline is provided as an overview of and topical guide to corporate finance:

Premium Bonds is a lottery bond scheme organised by the United Kingdom government since 1956. At present it is managed by the government's National Savings and Investments agency.

Purchasing power parity (PPP) is a measure of the price of specific goods in different countries and is used to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a market basket at one location divided by the price of the basket of goods at a different location. The PPP inflation and exchange rate may differ from the market e

Rent-seeking is the act of growing one's existing wealth by manipulating public policy or economic conditions without creating new wealth.

In mathematical finance, a risk-neutral measure (also called an equilibrium measure, or equivalent martingale measure) is a probability measure such that each share price is exactly equal to the discounted expectation of the share price under this measure.

In actuarial science and applied probability, ruin theory (sometimes risk theory or collective risk theory) uses mathematical models to describe an insurer's vulnerability to insolvency/ruin. In such models key quantities of interest are the probability of ruin, distribution of surplus immediately prior to ruin, and deficit at time of ruin.

In mathematical finance, the SABR model is a stochastic volatility model, which attempts to capture the volatility smile in derivatives markets. The name stands for "stochastic alpha, beta, rho", referring to the parameters of the model. The SABR model is widely used by practitioners in the financial industry, especially in the interest rate derivative markets. It was developed by Patric

Sales and trading is one of the primary front-office divisions of major investment banks. The term is typically reserved for the trading activities done by sell-side investment banks who are primarily engaged in making markets for institutional clients in various forms of securities. The trading floor of these banks will contain dedicated desks who generally focus exclusively on trading

A seasoned equity offering (SEO) or capital increase is a new equity issued by an already publicly traded company. Seasoned offerings may involve shares sold by existing shareholders (non-dilutive), new shares (dilutive), or both. If the seasoned equity offering is made by an issuer that meets certain regulatory criteria, it may be a shelf offering.

A secondary market offering, according to the U.S. Financial Industry Regulatory Authority (FINRA), is a registered offering of a large block of a security that has been previously issued to the public. The blocks being offered may have been held by large investors or institutions, and proceeds of the sale go to those holders, not the issuing company. It is also called a secondary distri

The Snell envelope, used in stochastics and mathematical finance, is the smallest supermartingale dominating a stochastic process. The Snell envelope is named after James Laurie Snell.

Stochastic calculus is a branch of mathematics that operates on stochastic processes. It allows a consistent theory of integration to be defined for integrals of stochastic processes with respect to stochastic processes. This field was created and started by the Japanese mathematician Kiyosi Itô during World War II.

A stochastic differential equation (SDE) is a differential equation in which one or more of the terms is a stochastic process, resulting in a solution which is also a stochastic process. SDEs have many applications throughout pure mathematics and are used to model various behaviours of stochastic models such as prices of listed company shares, random growth models or physical systems tha

In mathematics, stochastic partial differential equations (SPDEs) are a generalization of partial differential equations via random force terms and coefficients, in the same way ordinary stochastic differential equations generalize ordinary differential equations.

"The Market for 'Lemons': Quality Uncertainty and the Market Mechanism" is a widely cited seminal paper in the field of economics which explores the concept of asymmetric information in markets. The paper was written in 1970 by George Akerlof and published in the Quarterly Journal of Economics. The paper's theory has since been applied to many types of markets.

In finance, the Vasicek model is a mathematical model describing the evolution of interest rates. It is a type of one-factor short-rate model as it describes interest rate movements as driven by only one source of market risk. The model can be used in the valuation of interest rate derivatives, and has also been adapted for credit markets. It was introduced in 1977 by Oldřich Vašíček, an