**Finance Concept Base**

**The sections listed below are
in-depth discussions of some of the major topics in finance. This is not
the stuff you find in textbooks, and some of it may contradict widely held
notions. But you just may learn something, so take a look.**

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**This section gives a quick overview of
some of the important concepts involved in the study of finance. It's all
about "things" and contracts and personal goals. Some of the
topics mentioned here are treated separately in more detail.**

**Decision making is the stuff that life
is made of. Here are some ideas about how decision making can be
approached logically.**

**Yes, it is true, accounting can make a
strong person weep and make a weak person contemplate becoming an
economist. But to be fair to the accountants, they have a tough job trying
to figure out how to distill actions down into numbers. The whole
trick to understanding accounting statements is to figure out exactly what each
of the accounts means in the real world. That is what this section will
help you do.**

**Risk is one of the most important
concepts in finance, and it is also one of the slipperiest. Most textbooks
do not agree on the definition of risk. This piece puts risk in
perspective.**

**All investments are contracts.
While there are many different types of investments, and more are created every
day, all investments are really just combinations of three basic
contracts. This section shows how they work.**

**This section explains how to use a
fairly simple type of graphical analysis to understand the profit or loss that
can be realized from any investment. It does not matter how complex the
financial contract seems, this type of analysis will unravel its potentials.**

**Moving money through time is one of the
things that financial analysts do best. These pages show just how simple
it really is.**

**Financial Decisions and the Reinvestment Assumption**

**Time value of money analysis uses
mathematics. As it happens, there is one particularly interesting little
mathematical quirk that hides in the middle of the decision making process, the reinvestment assumption. Most
textbooks get this wrong, and none explain why it exists. Those
two deficiencies are corrected here.**

**Bonds and bond analysis are one of the
major areas of finance. In all honesty, bond analysis can be a bit boring
because it is so easy to do. There are, however, some clever little twists
and turns that keep things interesting.**

**Equity securities are a bit more lively
than bonds, but their analysis is also quite simple. This section shows
how these contracts work.**

**Sharks and Lemmings: How the
Stock Market REALLY Works**

**Here it is, the ANSWER. You too
can understand why some people make money and some lose. Figure out which
you want to be.**

**Breakeven, Leverage, and
Elasticity**

**Believe it or not, these three
seemingly diverse topics are all just different aspects of a firm's
profitability. This section shows how they all interact.**

**A General Model for Valuing
Equity Securities**

**This is an exercise in
mathematics. The Gordon-Shapiro dividend discount model for pricing stock
is in virtually every investments and principles textbook. The model is
derived under certain boundary conditions, and the result is neat and
simple. This paper relaxes the boundary conditions and starts from first
principles. It is shown that the Gordon-Shapiro model is actually a
special case of this general model. You need to know a little calculus to
get through this one.**

**This is a series of three papers that
present a different approach to option pricing and even the analysis of the
data. This is not Black-Scholes or anything like it. It is an
entirely new attack on this classic problem, and the results are really quite
good. If you do not have an open mind, stay away. Here there be
Tygers.**

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