Showing papers on "Leverage (finance) published in 1968"

Intertemporal bank asset choice with stochastic dependence

Abstract: : The paper extends existing models of inter-temporal bank asset management in the following respects: (a) Bank customers are identified, with requirements that their demands for loan renewals be satisfied. Opportunities are provided for attracting new customers; (b) feedback relationships between loans and deposits are introduced; (c) costs of servicing loans with different degrees of risk are introduced explicitly; (d) future deposits and loan repayments are expressed as jointly dependent random variables; (e) the Federal Reserve Board's liquidity leverage suggestions are replaced by chance-constraints on meeting demands for loans. This leads to a policy of balancing maturities in the bond portfolio. The format of the model is that of chance- constrained programming, with piecewise linear approximations to the non-linear constraints. A 5-period example, with parameterizing on the right hand side, is presented.

Dual Funds Revisited

Abstract: ALTHOUGH change and uncertainty are dynamic elements in financial markets, financial instruments and institutions tend to evolve slowly. However, the introduction of dual funds in the spring of 1966, offering a new twist to the old financial concept of leverage, was a notable financial innovation. As such, there is no direct American experience on which to base an appraisal of the investment performance to be expected. In a recent article in this Journal' dual funds were evaluated by Shelton, Brigham and Hofflander, hereafter referred to as S-B-H. They discussed the difficult investment management problem of balancing returns from one portfolio between the two investor classes with different objectives-income and capital appreciation, and analyzed the investor's problem of estimating future performance of income and capital shares. The purposes of this paper are to offer a model for analyzing the two classes of stock; to examine some of the important assumptions and conclusions in the S-B-H article; to analyze the portfolio problem of trade-off between income and capital appreciation; and to present some experience from Britain where similar funds have been in operation for several years. This article assumes the reader has a general understanding of the nature of dual funds.