arXiv subjects
Publications and source records attributed to Magomet Yandiev.
This short paper is intended to demonstrate a crucial omission made by traders in setting the risk-free interest rate, especially in times of crisis: instead of increasing the risk-free rate, traders undercut it en masse on the contrary. This results in incorrect investment and financial decisions, especially those involving CAPM models, option pricing models and portfolio theory.
The present paper provides the basis for a novel financial asset pricing model that could avoid the shortcomings of, or even completely replace the traditional DCF model. The model is based on Brownian motion logic and expected future cash flow values. It can be very useful for Islamic Finance.
The article presents calculations that prove practical importance of the earlier derived theoretical relationship between the interest rate on the interbank credit market, volume of investment and the quantity of securities tradable on the stock exchange.