Modelling Reality and Personal Modelling

1. Front Matter

   Pages I-VI

   PDF

2. Modelling Reality

   • Richard Flavell

   Pages 1-3

3. Economic Policy Determinants: Sensitivity Testing Based on the Mahalanobis Distance Statistic

   • Dirk-Emma Baestaens

   Pages 4-22

4. Time Dominance and I.R.R.

   • Francesca Beccacece, Erio Castagnoli

   Pages 23-32

5. Linear Gears for Asset Pricing

   • Erio Castagnoli, Marco Li Calzi

   Pages 33-44

6. A Definitions and results from stochastic calculus

   • Richard Flavell

   Pages 45-47

7. Stochastic Behaviour of European Stock Markets Indices

   • Albert Corhay, A. Tourani Rad

   Pages 48-71

8. Measuring Firm/Market Information Asymmetry: The Model of Myers and Majluf or the Importance of the Asset Structure of the Firm

   • Nathalie Dierkens

   Pages 72-94

9. The Construction of Smoothed Forward Rates

   • Richard Flavell, Nigel Meade

   Pages 95-115

10. An Index of De-stability for Controlling Shareholders

    • Gianfranco Gambarelli

    Pages 116-127

11. On Imitation

    • M. L. Gota, L. Peccati

    Pages 128-144

12. Financial Factors and the Dutch Stock Market: Some Empirical Results

    • Winfried G. Hallerbach

    Pages 145-168

13. A Present Value Approach to the Portfolio Selection Problem

    • Klaus Hellwig

    Pages 169-177

14. Discounting When Taxes are Paid One Year Later: A Finance Application of Linear Programming Duality

    • L. Peter Jennergren

    Pages 178-188

15. The Asset Transformation Function of Financial Intermediaries

    • Wolfgang Kürsten

    Pages 189-205

16. Management of the Interest Rate Swaps Portfolio Under the New Capital Adequacy Guidelines

    • Mario Levis, Victor Suchar

    Pages 206-237

17. Developing a Multinational Index Fund

    • Nigel Meade

    Pages 238-252

18. Directional Judgemental Financial Forecasting: Trends and Random Walks

    • Andrew C. Pollock, Mary E. Wilkie

    Pages 253-271

19. Forecasting the Behaviour of Bankruptcies

    • Christian Starck, Matti Virén

    Pages 272-295

20. Theoretical Analysis of the Difference Between the Traditional and the Annuity Stream Principles Applied to Inventory Evaluation

    • Anders Thorstenson, Robert W. Grubbström

    Pages 296-326

The recent introduction of two European index options on the FTSE Eurotrack 100 and the Eurotop 100 is evidence of a demand from investors to hedge pan-European risk. The FTSE Eurotrack 100 was designed to closely resemble the longer established and widely quoted Morgan Stanley European index. The Eurotrack 100 covers a hundred companies in eleven countries in continental Europe. The index is denominated in DM and' a breakdown by value into the different countries covered is given in figure 1. Capitalisation weights for Figure 1 FT-SE Eurotrack 100 Index Norway mark Germany Italy Switzerland France Netherlands Another recently introduced European index is the Eurotop 100 index denominated in EeUs, this index contains twenty two UK companies which represent 27% by value of this index. The attraction of investments in these indices is that they provide a basis for weighted exposure to Europe, investors can then build on this 240 basis by investment in individual countries. The multinational context of the universe of shares defined by this index raises some new questions for the selection of portfolios, whether the portfolios are chosen for absolute performance or to track the index. Various possible objectives of portfolio selection will be discussed, in all cases the crucial role of the covariance matrix of returns is clear. The extra source of risk present in a multinational portfolio is the combination of country risk coupled with foreign exchange risk. Two models of the return covariance matrix are proposed and examined.

• Financing
• Finanzwirtschaft
• Funds
• Unternehmensforschung
• asset pricing
• controlling
• finance
• linear optimization
• management
• operations research
• simulation
• swaps

• The Management School, Imperial College, London, UK

  Richard Flavell

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