" yes this is an interesting topic, some we can find from option theory and practice." Indeed. I did that kind of research in the late 1980's and that is partly how I informed my opinion on the topic. Have you read any of the Free Banking literature? Kevin Dowd from the UK is one proponent of this i...

Limited liability is a fascinating topic. Assuming any private company ever had the wherewithal to sell it (which I totally doubt), what would the premium to buy limited liability insurance? I imagine it would be enormous. This being so, I have always thought that the corporate tax should be fairly ...

It is fascinating reading, at first blush its hard to tell if the guy is the next prophet (profit?) or a nut. There seems to be a lot of the confidence fairy within it, I assume that would be the angle against it that Krugman would take.As for alternate theories of finance, I find the free banking i...

Especially back in older days with limited computing power, it was not uncommon for risk systems to use closed-form approximations  in the interests of reducing computation times. It is not unusual to see this still today when dealing with products requiring slow path-dependent valuation like you ar...

LIBOR stands for London Interbank Offer Rate. 3-month LIBOR is the rate that applies over a 3-month interbank loan/deposit.  3-month LIBOR is not a compounded interest rate, but is typically quoted as a money market rate with the actual/360 day count. So, the PV of $1 discounted at 3-month LIBOR wou...

Presumably the strike would drop at the ex-dividend date. I am pretty sure the old finance and investment textbooks used to suggest that the ex-dividend price drop may be less than the dividend amount due to tax effects. And I recall academics used to work that logic backward to estimate the margina...

Why the hack job on Trudeau? Because he is a Liberal? He is also a pretty tough guy, check out on youtube how be beat up a brutish and much physically larger Tory senator in a charity boxing match. The loser's name was Patrick Brazzeau, who, inexplicably had pending criminal cases and previous convi...

It is common in option modeling to differentiate between diffusion or volatility time, and the forward period for the underlying. The instant you execute an option trade you are exposed to price movements in the underlying even though a spot trade in the underlying made at the same time hasn’t yet s...

Get a copy of the undergrad corporate finance textbook textbook by Brealey and Myers and look up their stuff on PVGO - Present Value of Growth Opportunities. 

ppauper: I am not interested in any particular jurisdiction, just trying to throw some light on the poster's questions. So there is shade in America, imagine that!

I didn't look at the reference provided by the previous poster, but a comparison of forwards and futures now needs to take into account whether the trade is collateralized. Collateral exchange makes a forward contract behave more like a future, although there is still a difference between the consta...

It is indeed refreshing to see a thread that has not yet been hijacked into irrelevant humour by the usual suspects. From BNY Mellon's "Cleared Swap Handbook":  "– Centrally cleared OTC derivative contracts are valued by the CCPs independently using an auction process in which its members participa...

Old news surely, but a deposit product that seems a dead ringer for gaming the Basel LCR calculation is the constant maturity deposit. It originates as a 32-day deposit with a fixed rate. Every day the deposit is automatically re-struck with a new maturity of 32 days and possibly a new fixed rate. A...

A fancy name for good luck, perhaps selling it as skill for a higher bonus.

From a legal perspective, when a bond defaults all accrued and future interest payment obligations disappear and the principal payment becomes due immediately. The market price of a bond then becomes the risk-adjusted PV of the recovery of principal, implying a recovery rate.  Unless the default is ...