Fundamental Problems and Solutions in Finance

ISBN-13: 9789811982682 / Angielski / Twarda / 2023 / 419 str.

Zhiqiang Zhang

Opis

This book provides innovative solutions to fundamental problems in finance, such as the valuation of bond and equity, the pricing of debt, equity and total asset, the determination of optimal capital structure, etc., which are unsolved or poor-solved so far.The solutions in this book all have the following features:Based on essential assumptions in line with reality, the final solutions are analytical solutions with closed-form models, the forms and variables of the models are determined by strict and objective logic processes rather than chosen or presumed subjectively, such as the new growth model for stock valuation, the new CAPM accounting for total risk rather than only systematic risk, the real solution to optimal capital structure based on the trade-off between tax shield and bankruptcy cost. In addition, these basic solutions or models are adjusted easily to various application scenarios.

Spis treści

Part I Asset Valuation

Chapter 1 Finance and its Fundamental Problems

Chapter 2 Discounting and Bond Valuation

Chapter 3 Stock and Equity Valuation: Where Discounting Does Not Work

Appendix IA: Is Practice Ahead of Theory? ——Based on the Case of Finance

Appendix IB: On the Basic Classification of Social Science

Part II Asset Pricing

Chapter 4 Option Pricing and Valuation of Contingent Cash Flow

Chapter 5 Certainty Equivalent, Risk Premium and Asset Pricing

Chapter 6 Debt/Loan Risk, Bankruptcy Cost and Debt/Loan Pricing

Chapter 7 Capital Asset Pricing: An Easy and Unified Solution

Part III Leverage and Risks

Chapter 8 Tax Shield, Bankruptcy Cost and Optimal Capital Structure

Chapter 9 Some Extensive Discussions of ZZ Leverage Model

Chapter 10 Bankruptcy Probability and Firm Life Expectancy

O autorze

Zhiqiang Zhang, MBA (focusing on finance) of K. U. Leuven (Catholic University of Leuven, Belgium); Ph.D. in management, associate professor of Business School, Renmin University of China. Visiting professor at St. John's University (New York, one year); Visiting professor at New York University (one year). He has adhered to the original and innovative research on financial theory, especially on the tough financial problems.

He got many fundamental discoveries, such as a real Growth model for equity valuation (Gordon Growth model is actually cannot value “growth” and invalid although widely spread and used); a new CAPM series for debt, equity and total asset based on total risk rather than the single CAPM for equity discovered by Sharpe based only on systematic risk; a bankruptcy cost model and an optimal capital structure model based on the quantitatively trading-off between tax-shield and bankruptcy cost, as well as their variants in various application scenarios, such as optimal capital structure models in case of debt guarantee, outside investment, abnormal growth, and optimal capital structure model on book value basis; the overall solution to discount rate, i.e., the discount rate models for equity, debt and total assets that matches their total risks respectively. Those innovative models solve most of the unsolved or poor-solved fundamental financial problems, and provide more efficient theories and quantitative tools for the practical investment and financing decision-makings. As a consequence, most of the puzzles in finance can be explained more simply and thoroughly, such as the decreasing discount rate over long run as well as various puzzles about capital structure.