Present Value and Arbitrage Flashcards
What is Finance?
Finance is defined as paying a certain amount of money today and receiving a certain amount of money in the future or receiving a certain amount of money today and paying a certain amount of money in the future.
What is Cashflow and What is Investment?
Cashflow refers to each payment of money. Meanwhile investment is a series of cash flows, where some cashflows are positive (the money that you receive) and some are negative (the money that you pay).
What are the funthreedamental concepts in Finance?
The Present value or time value of money concept, the arbitrage concept, and the risk concept.
What is the formula for time value of money and What relationships exist within this formula?
The time value of money formula represents the relationship between the interest rate (or r) and the present value (PV) or future value (FV). Moreover, in this formula, the interest rate acts as an exchange rate for the present value and the future value through time.
What is the definition of the Net Present Value and what is its formula?
Net Present Value is the difference between the present value of a project’s benefits and the present value of its costs.
What is the definition of arbitrage?
Arbitrage refers to buying and selling equivalent assets in different markets to take advantage of a price difference.
What is the difference between Arbitrage and Risk-free return?
What is the definition of Law of one Price?
What are ETFs and how does arbitrage exist in this segment?
What is the difference between Long and Short position?
What is the process of Long Position?
What is the process of Short Position?
Please explain an Arbitrage limitation and why in general it can not exist? Moreover, are Arbitrages risky in the real world?
What is the arbitrage strategy for a company that is merging?
What is the difference between risk and uncertainty and What does the Ellsberg Paradox suggest?
