Chapter eleven Asset Markets
Chapter Eleven Asset Markets
Structure When to sell an asset? Rate-of-return Arbitrage Taxation of asset returns Applications Financial intermediaries
Structure When to sell an asset? –Rate-of-return Arbitrage Taxation of asset returns Applications Financial intermediaries
Assets(资产) An asset is a commodity that provides a flow of services over time E.g. a house, or a computer. A financial asset(金融资产) provides a flow of money over time a security
Assets （资产） An asset is a commodity that provides a flow of services over time. E.g. a house, or a computer. A financial asset （金融资产） provides a flow of money over time -- a security
Assets Typically asset values are uncertain. Incorporating uncertainty is difficult at this stage so we will instead study assets assuming that we can see the future with perfect certainty
Assets Typically asset values are uncertain. Incorporating uncertainty is difficult at this stage so we will instead study assets assuming that we can see the future with perfect certainty
Selling an asset Q: When should an asset be sold? When its value is at a maximum? No. Why not?
Selling An Asset Q: When should an asset be sold? When its value is at a maximum? No. Why not?
Selling An Asset Suppose the value of an asset changes with time according to V(t)=-1000+1000t-1
Selling An Asset Suppose the value of an asset changes with time according to V(t) = −1000 + 1000t − 10t 2
Value 24000 19000 14000 9000 4000 10000102030405060 Years
Selling An Asset -10000 10 20 30 40 50 60 4000 9000 14000 19000 24000 Value Years
Selling An Asset v(t)=-1000+1000t-10t Maximum value occurs when v(t)=1000-20t=0 That is when t= 50
Selling An Asset V(t) = −1000 + 1000t − 10t 2 Maximum value occurs when V'(t) = 1000 − 20t = 0 That is, when t = 50
Value 24000 19000 Max value o$24,000 14000 is reached at year 50 9000 4000 -10000102030405060 Years
Selling An Asset -10000 10 20 30 40 50 60 4000 9000 14000 19000 24000 Value Years Max. value of $24,000 is reached at year 50
Selling An Asset The rate-of-return(回报率) in year t is the income earned by the asset in year t as a fraction of its value in year t E.g. if an asset valued at $1,000 earns $100 then its rate-of-return is 10%
Selling An Asset The rate-of-return （回报率）in year t is the income earned by the asset in year t as a fraction of its value in year t. E.g. if an asset valued at $1,000 earns $100 then its rate-of-return is 10%