Sethi and Thompson (1970) illustrated the applications of the maximum principle to solve simple dynamic cash balance problems. There we introduced the idea of penalty function to solve the cash balance problem with bounded state variables arising out of disallowing overdrafts and short selling....

Using a “plug” figure or “slack term” within a pro forma analysis is the standard method to make a forecasted balance sheet have assets equal liabilities and equity. The plug is usually stock or long-term debt because either one or a combination of the two, are assumed to be the source...

We develop a simple model to predict requests for the Payroll Protection Program (PPP) and compare these predictions to the actual allocations. The model suggests the amount of requested funds could total $750 billion, though this is likely a high watermark conditional on several assumptions....

I study the effect of the implementation of the SEC's EDGAR system on two unique forms of information asymmetry: (1) asymmetry between managers and investors, and (2) asymmetry among different groups of investors. Information asymmetry theory suggests that firms' adoption of the EDGAR system can...

<p>I discuss a new intellectual paradigm, social economics and finance: the study of the social processes that shape economic thinking and behavior. This emerging field recognizes that people observe and talk to each other. A key, underexploited building block of social economics and finance is...</p>

Firm Profitability - Does it really matter for shareholder return or ROE (return on equity)? Does this question sound oxymoron and antithetic? Not really. On the contrary, evidence has surfaced that Returns on equity - based on the shareholders' equity accounted in the balance sheet - is not...

<p>This document contains presentation slides for the American Finance Association's Presidential Address of January 4, 2020. The address is based on the paper "Social Transmission Bias in Economics and Finance."</p><p>The paper: "https://ssrn.com/abstract=3550880" https://ssrn.com/abstract=3550880...</p>

<p>I discuss a new intellectual paradigm, social economics and finance: the study of the social processes that shape economic thinking and behavior. This emerging field recognizes that people observe and talk to each other. A key, underexploited building block of social economics and finance is...</p>

It is widely believed that call options induce risk-taking behavior. However, Ross (2003) challenges this intuition by demonstrating the impossibility of inducing managers with arbitrary preferences to always act as if less risk averse. If preferences and price distributions are unknown,...

The present value discount rate is about the investor, the expected market rate of return on his best alternative asset (BAA), his opportunity cost of buying a subject asset (not the subject's rate of return, subject owner's/seller's cost of capital, nor the required rate of return on an...