The use of an inter-temporally constant discount rate or cost of capital is a strong assumption in many <italic>ex ante</italic> models of finance and in applied procedures such as capital budgeting. We investigate how robust this assumption is by analysing the implications of allowing the cost of capital to...

The instantaneous return on the Financial Times-Stock Exchange (FTSE) All Share Index is viewed as a frictionless particle moving in a one-dimensional square well but where there is a non-trivial probability of the particle tunneling into the well’s retaining walls. Our analysis demonstrates...