Just out of curiosity. In the opinion of people in this forum, what are the most important concepts that everyone studying finance must know? That is, what question can someone ask a student of finance that he/she must be able to answer correctly all the time.

time value of money

DERIVATIVES

get rich or die tryin´

As a pimp I'd saythere are several questions that cause people to fail outright.1: What qualifications do you have ? A % of people spell PhD, PdH. That's bad.2: Do you have a telephone, does it have a number ? Why isn't it on your CV ?3: Why do you want to do quant finance ?Employers do ask at that, and as far as a I can tell 2-3% of candidates can't answer this at all. "Err, I've studied it for 3 years, and I want to work in a bank" is not an answer.There is a FAQ topic for more techincal things.

Just out of curiosity. In the opinion of people in this forum, what are the most important concepts that everyone studying finance must know? That is, what question can someone ask a student of finance that he/she must be able to answer correctly all the time.My answer to this question is:Can you tell me what an acceptable ROI is and how much risk will be deployed in order for YOU to achieve this result?

QuoteOriginally posted by: csaJust out of curiosity. In the opinion of people in this forum, what are the most important concepts that everyone studying finance must know? That is, what question can someone ask a student of finance that he/she must be able to answer correctly all the time.What's in it for moi?

QuoteOriginally posted by: csaJust out of curiosity. In the opinion of people in this forum, what are the most important concepts that everyone studying finance must know? That is, what question can someone ask a student of finance that he/she must be able to answer correctly all the time."No arbitrage" is probably the most important concept. And the related question is, "How do you make riskless arbitrage profits in this situation?"

I agree with jomni - time value of money is the most important concept: you can't imagine how many candidates think that the price of a 5% bond is below par when rates are flat at 4%. That includes PhD-level candidates.e.

admittedly my skill set is mostly fast market trading of linear rate products and not financial theory, but the most important issue in the financial markets form my experience is the following:if you find yourself in a bad trade "sell what you OWN, not what you CAN"....there is a tremendous human psychological tendency of denial which leads many people to "liquidate" a bad trade not by selling the exact asset, but rather shorting something "correllated" and that "looks expensive" relative tp the crap that is actually owned.... for example if one goes long 10y govt bonds and rates subsequentyl gap higher and they to get out, it is not uncommon for that person to not want to fully admit their mistake and sell those exact 10y bonds, but rather to look that the yield curve and decide that since 5y bonds have fallen in price much less, then it is more sensible to sell 5y bonds agains the 10y bonds and make the bad trade into an even crappier yield curve trade,,,,, an old, hilarious trading associate of mine used to call this tendency "polishing the turd"......so in short my assertion of the most important issue in finance is not to polish the turd.....

The second most important concept is probably that prices are set at the margin. The third most important concept is probably that prices are based on best use. Maybe I've reversed those.I can't see that the time value of money is that important. At one level, it's not even very reliable; and at another level, it would probably be better described as just an aspect of no arbitrage.

QuoteOriginally posted by: johnself11admittedly my skill set is mostly fast market trading of linear rate products and not financial theory, but the most important issue in the financial markets form my experience is the following:if you find yourself in a bad trade "sell what you OWN, not what you CAN"....there is a tremendous human psychological tendency of denial which leads many people to "liquidate" a bad trade not by selling the exact asset, but rather shorting something "correllated" and that "looks expensive" relative tp the crap that is actually owned.... for example if one goes long 10y govt bonds and rates subsequentyl gap higher and they to get out, it is not uncommon for that person to not want to fully admit their mistake and sell those exact 10y bonds, but rather to look that the yield curve and decide that since 5y bonds have fallen in price much less, then it is more sensible to sell 5y bonds agains the 10y bonds and make the bad trade into an even crappier yield curve tradeWhy rush to sell? If you are holding an obviously bad position, the current price has impounded most of the bad news. So why are you obviously better off to sell immediately at the low price? After all, to sell, you have to find a buyer. You are assuming there are buyers who are eager to buy your bad position at a premium! Isn't it foolishly arrogant to assume that you are so much smarter than that buyer?

KackToodles, i'll judge by your post experience here that you are having a laugh.......nice one.....