I’ve put up a small web page that collects a few short introductory notes, mostly about mathematical concepts that arise in finance. I wrote them mostly to clear up my own understanding, but if anyone else is interested … here they are:

IdOp’s Arcana

At this time the topics touched on are:

- Bond duration,
- Relation between geometric and arithmetic weighted averages,
- Sharpe’s index arithmetic,
- The Gordon equation,
- Personal view of stock valuation.

The last two have been mentioned previously on this blog. In particular, the Gordon equation (GE) note was substantially revised in May, 2008, a little over 2 years since originally posting v1.01 of it. In reviewing what I’d written before, it was clear the math was ok, but I hadn’t achieved the goal of totally de-confusing the stated assumptions. There was a lot of forest, but still a few trees. It’s amazing how one can become numb to the deficiencies in something after you stare at it for a while, so the 2+ year break helped.

I’ve now revised the necessary areas. Changes deal mainly with the conditions under which the GE is exact, in particular the possibilities once earnings/valuation has been added to the picture. The clarity seems *mo’ bettah* now; hopefully it’s 99.9% forest. There are a few other small additions/changes as well, including a trivial derivation of a GE for short time.

Any new note additions may possibly be posted on this blog.

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This entry was posted on July 29, 2008 at 12:13 pm and is filed under Politics.

April 8, 2016 at 5:48 am

I don’t know what’s with me. But I cried when I read this. Thank you for putting it up here. Come on http://tropaadet.dk/maurinewinters3906081845