Discount factor

1. Discount factor https://store.theartofservice.com/the-discount-factor-toolkit.html

2. Patent valuation - Income-based method • This method is based on the principle that the value of an asset is intrinsic to the expected income flows it generates. After the income is estimated, the result is discounted by an appropriate discount factor with the objective to adjust it to the present circumstances and therefore to determine the net present value of the intellectual property. There are different methods of calculation of the future cash flows, such as: https://store.theartofservice.com/the-discount-factor-toolkit.html

3. Patent valuation - Income-based method • # Discounted cash flow method: This method aims to estimate future cash flows, which are projected and after discounted by applying an appropriate discount factor. The main source of information to estimate the cash flows is generally the business plan of the company that exploits or intends to exploit the asset. https://store.theartofservice.com/the-discount-factor-toolkit.html

4. Patent valuation - Toolip Valuation • It also manages information about legal data (patent validity, extension countries, remaining term) and financial data (annual turnover, expected growth in the company or market, discount factors), and also covering technological, strategic or marketing aspects of the patented technology https://store.theartofservice.com/the-discount-factor-toolkit.html

5. Stern Review on the Economics of Climate Change - Inherent discounting • He supports the discount factors used in the Stern analysis, particularly the view that discounting should reflect only the probability that the world will end at a given future date, and not the impatience of an infinitely lived representative consumer.) https://store.theartofservice.com/the-discount-factor-toolkit.html

6. Hyperbolic discounting - Formal model • where f(D) is the discount factor that multiplies the value of the reward, D is the delay in the reward, and k is a parameter governing the degree of discounting. This is compared with the formula for exponential discounting: https://store.theartofservice.com/the-discount-factor-toolkit.html

7. Hyperbolic discounting - Quasi-hyperbolic approximation • where β and δ are constants between 0 and 1; and again D is the delay in the reward, and f(D) is the discount factor. The condition f(0) = 1 is stating that rewards taken at the present time are not discounted. https://store.theartofservice.com/the-discount-factor-toolkit.html

8. Stock valuation - Limited high-growth period approximation • and hence are extremely sensitive to the difference of dividend growth to discount factor. One might argue that an analyst can justify any value (and that https://store.theartofservice.com/the-discount-factor-toolkit.html

9. Model (economics) - Omitted details • * In turn, environmental economics has been accused of omitting key financial considerations from its models. For example the returns to solar power investments are sometimes modelled without a discount factor, so that the present utility of solar energy delivered in a century's time is precisely equal to gas-power station energy today. https://store.theartofservice.com/the-discount-factor-toolkit.html

10. At the money - Simple examples • Note that once logs are taken, moneyness in terms of forward or spot differ by an additive factor (log of discount factor), as \ln\left(F/K\right) = \ln(S/K)+rT. https://store.theartofservice.com/the-discount-factor-toolkit.html

11. Discounting - Discount factor • The 'discount factor', DF(T), is the factor by which a future cash flow must be multiplied in order to obtain the present value. For a zero-rate (also called spot rate) r, taken from a yield curve, and a time to cashflow T (in years), the discount factor is: https://store.theartofservice.com/the-discount-factor-toolkit.html

12. Discounting - Discount factor • In the case where the only discount rate you have is not a zero-rate (neither taken from a zero-coupon bond nor converted from a swap rate to a zero-rate through Bootstrapping (finance)|bootstrapping) but an annually-compounded rate (for example if your benchmark is a US Treasury bond with annual coupons and you only have its yield to maturity, you would use an annually-compounded discount factor: https://store.theartofservice.com/the-discount-factor-toolkit.html

13. Discounting - Discount factor • In that case, the discount factor is then (if the usual money market day count convention for the currency is ACT/360, in case of currencies such as USD, EUR, JPY), with r the zero-rate and T the time to cashflow in years: https://store.theartofservice.com/the-discount-factor-toolkit.html

14. Welfare cost of business cycles - Mathematical representation and formula • Lucas sets up an infinitely lived representative agent model where total lifetime utility(U is given by the present discounted value (with \beta representing the Discount factor#Discount factor|discount factor) of per period utilities (u(.)) which in turn depend on consumption in each period (c_t) https://store.theartofservice.com/the-discount-factor-toolkit.html

15. Valuation using multiples - Determining discount rate / factor • VirusControl has chosen their discount rate very high as their company is potentially very profitable but also very risky. They calculate their discount factor based on five years. https://store.theartofservice.com/the-discount-factor-toolkit.html

16. Valuation using multiples - Determining current company value • Calculate the current value of the future company value by multiplying the future business value with the discount factor. This is known as the time value of money. https://store.theartofservice.com/the-discount-factor-toolkit.html

17. Valuation using multiples - Determining current company value • VirusControl multiplies their future company value with the discount factor: https://store.theartofservice.com/the-discount-factor-toolkit.html

18. Impulsive behaviour - Intertemporal choice • Many studies suggest that humans and animals discount future values according to a hyperbolic discounting curve where the discount factor decreases with the length of the delay (for example, waiting from today to tomorrow involves more loss of value than waiting from twenty days to twenty-one days) https://store.theartofservice.com/the-discount-factor-toolkit.html

19. Price leadership - Duopoly example • To be more precise, suppose that firms have a Discounting#Discount factor|discount factor \delta. The discounted value of the cost to cheating and being punished indefinitely are https://store.theartofservice.com/the-discount-factor-toolkit.html

20. Inverted yield curve - Market expectations (pure expectations) hypothesis • The significant difficulty in defining a yield curve therefore is to determine the function P(t). P is called the discount factor function. https://store.theartofservice.com/the-discount-factor-toolkit.html

21. Inverted yield curve - Market expectations (pure expectations) hypothesis • Let the vector F represent today's prices of the instrument (so that the i-th instrument has value F(i)), then by definition of our discount factor function P we should have that F = AP (this is a matrix multiplication) https://store.theartofservice.com/the-discount-factor-toolkit.html

22. Impulsivity - Intertemporal choice • Many studies suggest that humans and animals discount future values according to a hyperbolic discounting curve where the discount factor decreases with the length of the delay (for example, waiting from today to tomorrow involves more loss of value than waiting from twenty days to twenty-one days) https://store.theartofservice.com/the-discount-factor-toolkit.html

23. Risk-neutral measure - Usage • Risk-neutral measures make it easy to express the value of a derivative in a formula. Suppose at a future time T a derivative (e.g., a call option on a stock) pays H_T units, where H_T is a random variable on the probability space describing the market. Further suppose that the discount factor from now (time zero) until time T is P(0, T). Then today's fair value of the derivative is https://store.theartofservice.com/the-discount-factor-toolkit.html

24. Folk theorem (game theory) • The folk theorem states that any feasible payoff profile that strictly dominates the minmax profile can be realized as a Nash equilibrium payoff profile, with sufficiently large discount factor. https://store.theartofservice.com/the-discount-factor-toolkit.html

25. Folk theorem (game theory) - Sketch of proof • In more detail, assume that the payoff of a player in an infinitely repeated game is given by the average discounted criterion with discount factor 0 δtt \geq 011-\delta \epsilon. https://store.theartofservice.com/the-discount-factor-toolkit.html

26. Stochastic discount factor • A 'Stochastic discount factor (SDF)' is a concept in financial economics and mathematical finance. https://store.theartofservice.com/the-discount-factor-toolkit.html

27. Stochastic discount factor • This definition is of fundamental importance in Valuation (finance)|asset pricing. The name stochastic discount factor reflects the fact that the price of an asset can be computed by discounting the future cash flow \tilde_i by the stochastic factor \tilde and then taking the expectation. https://store.theartofservice.com/the-discount-factor-toolkit.html

28. Stochastic discount factor - Other names • The stochastic discount factor is sometimes referred to as the 'pricing kernel'. This name comes from the fact that if the expectation https://store.theartofservice.com/the-discount-factor-toolkit.html

29. Integral kernel - Motivation • Also there are many applications of probability that rely on integral transforms, such as pricing kernel or stochastic discount factor, or the smoothing of data recovered from robust statistics, see kernel (statistics). https://store.theartofservice.com/the-discount-factor-toolkit.html

30. Kernel - Finance • * Pricing kernel, another name for the stochastic discount factor used in asset pricing https://store.theartofservice.com/the-discount-factor-toolkit.html

31. Greeks (finance) - Practical use • By put–call parity, long a call and short a put equals a forward F, which is linear in the spot S, with factor the inverse of the discount factor, so the derivative dF/dS is this factor. https://store.theartofservice.com/the-discount-factor-toolkit.html

32. Greeks (finance) - Practical use • 50 Delta put and 50 Delta call are not quite identical, due to spot and forward differing by the discount factor, but they are often conflated. https://store.theartofservice.com/the-discount-factor-toolkit.html

33. Monte Carlo methods in finance - Mathematically • where _T is the discount factor corresponding to the risk-free rate to the final maturity date T years into the future. https://store.theartofservice.com/the-discount-factor-toolkit.html

34. Put-call parity - Statement • The assets C and P on the left side are given in current values, while the assets F and K are given in future values (forward price of asset, and strike price paid at expiry), which the discount factor D converts to present values. https://store.theartofservice.com/the-discount-factor-toolkit.html

35. Bond convexity - How bond duration changes with a changing interest rate • As the interest rate increases, the present value of longer-dated payments declines in relation to earlier coupons (by the discount factor between the early and late payments) https://store.theartofservice.com/the-discount-factor-toolkit.html

36. Annual effective discount rate • It is the annual discount factor to be applied to the future cash flow, to find the discount, subtracted from a future value to find the value one year earlier. https://store.theartofservice.com/the-discount-factor-toolkit.html

37. Discounted - Discount factor • In that case, the discount factor is then (if the usual money market day count convention for the currency is ACT/360, in case of currencies such as United States dollar, euro, Japanese yen), with r the zero-rate and T the time to cash flow in years: https://store.theartofservice.com/the-discount-factor-toolkit.html

38. Best places in the US to retire • Ranking methodologies have a mixture of Subjectivity|subjective and statistical elements, and some surveys discount factors such as Climate, while others emphasize it https://store.theartofservice.com/the-discount-factor-toolkit.html

39. Bootstrapping (finance) • #Derive discount factors for all terms, these are the internal rates of return of the bonds https://store.theartofservice.com/the-discount-factor-toolkit.html

40. Bellman equation - A dynamic decision problem • Finally, we assume impatience, represented by a discount factor 0 \betaPrinciple of Optimality: An optimal policy has the property that whatever the initial state and initial decision are, the remaining decisions must constitute an optimal policy with regard to the state resulting from the first decision https://store.theartofservice.com/the-discount-factor-toolkit.html

41. Gretna, Dumfries and Galloway - Present day • Much of the local economy is driven by the Marriage in Scotland|marriage industry, where by some accounts, as many as one of every six Scottish weddings takes place in Gretna / Gretna Green. Most marriages take place in Gretna itself, at the Register office, the Anvil Hall, or in the numerous Hotels in the centre of the township. Gretna is also the location of the Gretna Gateway Outlet Village, a development of discount factory shops. https://store.theartofservice.com/the-discount-factor-toolkit.html

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