Donald E. Farrar, Jack L. Treynor, Problems in Selection of Security Portfolios: Discussion, The Journal of Finance, Vol. 23, No. 2, Papers and Proceedings of the Twenty-Sixth Annual Meeting of the American Finance Association Washington, D.C. December 28-30, 1967 (May, 1968), pp. 417-419

The article focuses on the cash take-overs and accounting valuations. In the past decade the annual number of cash take-over bids has increased over five hundred per cent, and the rate of increase is accelerating. A take-over bid is generally defined as a bid to purchase some or all of a corporation's stock made by an outsider. It may be an offer to exchange stock for stock or it may be an offer to pay cash for stock. The bidder that offers stock for stock loses the important advantage of surprise, since the issuing shares must be registered with the Securities and Exchange Commission in advance. The disclosure requirements which accompany the registration are complex and may be difficult to execute without access to the offeree's records. Because of the element of surprise, the cash tender is generally used when the bidder takes a position adverse to incumbent management. The atmosphere of secrecy in which these bids are launched has left many legislators, financiers and academicians uncertain as to how and why they occur.

There is limited treatment of the optimal protection of assets against casualty or liability loss. The problem of optimal insurance coverage is formally similar to the problem of optimal inventory stockage under uncertainty. If casualty or liability loss (demand) is less than the insurance coverage (inventory level), excessive insurance cost (inventory holding cost) is incurred. If casualty or liability loss (demand) is greater than the insurance coverage (inventory level), one must absorb the cost of the unrecoverable loss (sales loss). These two components of loss must be balanced in determining optimal insurance (inventory) levels.