The trading of security options is one of the fastest growing and most dynamic areas of investment concern. When the Chicago Board of Trade's proposal to develop an exchange for trading option contracts is implemented, security option trading will become an even more important aspect of the investment world.

Solomon and others' have examined the relationship between the book yield on assets using conventional depreciation method and the cash-flow yield or internal rate of return of the assets. A substantial discrepancy between these two yields is often observed. Of course, if firms used the internal rate of return method of depreciation recommended by Anton2 and Reynolds,3 there would be no discrepancy between the expected book yield and the expected cash-flow yield. Unfortunately, these are practical and institutional considerations which often prevent the accountant from implementing an internal rate of return method of depreciation. Bierman4 and Shwayder5 (hereinafter referred to as the previous papers) explored the effect of price-level adjustments on the book rate of

There now exists a relatively large body of literature dealing with statistical sampling in auditing. This literature is mainly classical, in the sense that the auditor subjectively specifies desired confidence intervals1 and confidence levels as the basis for designing his audit sample.2 In specifying a confidence level, the auditor should take his evaluation of the adequacy of the firm's internal control into account, i.e., better internal control allows a lower audit size and enables the auditor to accept the resulting lower level of confidence in his estimates. However, no formal mechanism exists for linking the auditor's prior assessment of internal control and his sample design. Rather, this is left to the auditor's judgment.3 The lack of such a mechanism is a major defect of the classical approach to statistical sampling in auditing.

An important issue in the financial literature concerns the conflict between the stochastic dominance (SD) and the mean-variance (EV) methods of choosing optimal portfolios of risky assets. Much of the recent theoretical and empirical work in portfolio analysis has been devoted to the extension and testing of the Markowitz two-moment model, in which it is assumed that either (a) decision makers have quadratic utility functions with negative second derivatives or (b) the probability functions are from some appropriate two-parameter family and the investor is risk averse.

The basic model of this paper is that of a transactor who is to receive at a specified time t in the future a fixed quantity of domestic funds Ad and a fixed quantity of foreign funds Af. It is further assumed that there exists a forward market in foreign exchange in which one unit of foreign currency can be bought and sold at a given and known forward rate rf, the domestic currency price of one unit of foreign currency. Let X be the net forward purchases of foreign exchange that the transactor undertakes at the market rate rf; a negative value of X indicates net sales of forward exchange. It is assumed that at time t the foreign currency will be convertible for the transactor at a fixed but unknown spot exchange rate and that the transactor can assess or derive a probability distribution on this spot exchange rate f(rt) for rt > 0. Finally, it is assumed that the transactor can express a utility function u on the domestic currency equivalent of his ending currency holdings. This paper considers the problem of determining the optimal level of forward exchange purchases X0.

Recent theoretical and empirical work in portfolio theory has exhibited a natural evolution from the two-moment EV model popularized by Markowitz through the higher moment models to selection on the basis of the entire probability function. This latter approach, referred to as the Stochastic Dominance (SD) approach to portfolio selection, has been shown to be theoretically superior to all of the “moment methods” and has been the focus of an increasing volume of empirical work.

Journal Article Efficient Estimation of the Reduced Form from Incomplete Econometric Models Get access R. H. Court R. H. Court University of Auckland Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 3, July 1973, Pages 411–417, https://doi.org/10.2307/2296460 Published: 01 July 1973

Ernst R. Berndt, Laurits R. Christensen; The Internal Structure of Functional Relationships: Separability, Substitution, and Aggregation12, The Review of E