Overview

This book clarifies several ambiguous arguments and claims in finance and the theory of the firm. It also serves as a bridge between derivatives, corporate finance and the theory of the firm. In addition to mathematical derivations and theories, the book also uses anecdotes and numerical examples to explain some unconventional concepts. The main arguments of the book are: (1) the ownership of the firm is not a valid concept, and firms’ objectives are determined by entrepreneurs who can innovate to earn excess profits; (2) the Modigliani-Miller capital structure irrelevancy proposition is a restatement of the Coase theorem, and changes in the firm’s debt-equity ratio will not affect equity-holders’ wealth (welfare), and equity-holders’ preferences toward risk (or variance) are irrelevant; (3) all firms' resources are options, and every asset is both a European call and a put option for any other asset; and (4) that a first or residual claim between debt and equity is non-existent while the first claim among fixed-income assets can actually affect the market values of these assets.

Full Product Details

Author:   Kuo-Ping Chang
Publisher:   Springer Verlag, Singapore
Imprint:   Springer Verlag, Singapore
Edition:   2015 ed.
Dimensions:   Width: 15.50cm , Height: 0.50cm , Length: 23.50cm
Weight:   1.474kg
ISBN:  

9789812873521

ISBN 10:   981287352
Pages:   76
Publication Date:   16 January 2015
Audience:   Professional and scholarly ,  Professional & Vocational
Format:   Paperback
Publisher's Status:   Active
Availability:   Manufactured on demand  
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Table of Contents

Preface.- Chapter 1: The Ownership of the Firm.- 1.1: A Story of Robin Hood.- 1.2: Power, Entrepreneur, and Objectives of the Firm.- 1.3: Choice, Risk Attitude, and Types of Contract.- References.- Chapter 2: Maximizing Profits and Maximizing Resource Providers' Wealth.- 2.1: The Coase Theorem and the Modigliani-Miller Propositions.- 2.2: A Simple Example of the Modigliani-Miller Second Proposition.- References.- Chapter 3: A Reconsideration of the Modigliani-Miller Propositions.- 3.1: A Tale of Two Cows-The Modigliani-Miller First Proposition.- 3.2: Some Fallacious Arguments for the Modigliani-Miller Second Proposition.- References.- Chapter 4: Derivatives and the Theory of the Firm.- 4.1: Model-Free Option Prices.- 4.2: The Firm's Resources and Derivatives.- 4.2.1: Each Resource Is Both a European Call Option and a European Put Option.- 4.2.2: Each Resource Is a Stock Plus a Forward Contract.- References.- Chapter 5: Arbitrage and Valuation of Different Contracts.- 5.1: The Arbitrage Theorem.- 5.2: Properties of the Binomial Option Pricing Model.- 5.3: Valuing Different Contracts.- Appendix A: Incomplete Market.- Appendix B: Incomplete Market and Replication of Securities.- Appendix C: More Uncertain Project and the Firm's Value.- References.- Chapter 6: Misinterpretations of Residual Claim in Finance and Corporate Law.- 6.1: De Jure versus De Facto.- 6.2: Agency Costs and Residual Claim.- 6.3: Moral Hazard and Residual Claim.- References.- Index.

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Author Information

Dr. Chang is Honourable Emeritus Professor, Department of Quantitative Finance at National Tsing Hua University, Taipei, Taiwan. He received his PhD degree in Economics & Finance from University of Pennsylvania, USA. Dr. Chang has been teaching microeconomics, mathematical economics, and mathematical finance in both economics and finance departments for many years. He has published various papers in leading journals of management science, economics and finance regarding productivity/efficiency analysis, regulatory economics, and quantitative finance.

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