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Modern portfolio theory (MPT), or mean-variance analysis, is a mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk. It is a formalization and extension of diversification in investing, the idea that owning different kinds of financial assets is less risky than owning ...
A replication of Martineau (2022). The efficient-market hypothesis ( EMH) [ a] is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.
Portfolio company. A portfolio company (commonly abbreviated as PortCo) is a company or entity in which a venture capital firm, a startup studio, or a holding company invests. [ 1] All companies currently backed by a private equity firm can be spoken of as the firm's portfolio. [ 2]
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 ...
v. t. e. An economic model is a theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified, often mathematical, framework designed to illustrate complex processes. Frequently, economic models posit structural parameters. [1]
Sustainable finance. v. t. e. In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity ), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". [ 1] It is used to evaluate new projects of a company.
In financial mathematics, a risk measure is used to determine the amount of an asset or set of assets (traditionally currency) to be kept in reserve. The purpose of this reserve is to make the risks taken by financial institutions, such as banks and insurance companies, acceptable to the regulator. In recent years attention has turned to convex ...
Exchange-traded funds, or ETFs, are an increasingly popular way to invest in the financial markets. An ETF holds stakes in many different assets, and by buying a share of the fund, you own a tiny ...