Cashflow Simulation for Evaluating Credit Risk on Corporate Bonds

1971 ◽  
Vol 97 (1) ◽  
pp. 85-97
Author(s):  
V. H. Karmarker
Keyword(s):  
Decision Making ◽  
Cash Flow ◽  
Financial Institutions ◽  
Investment Decision ◽  
Corporate Bonds ◽  
Flow Simulation ◽  
Rational Decision ◽  
Investment Decision Making ◽  
Rational Investment

Corporate bonds and privately placed loans constitute a large proportion of the portfolios of several financial institutions. When bonds of a corporation are purchased in the market or loans are granted by some other arrangement, the lender evaluates the risk relating to the investment in question. Determination of the level of risk is important, among other things, for facilitating comparison between different investments, setting the terms of loan agreements and making a rational decision concerning the acceptance or rejection of a loan proposal. Since evaluation of risk is very important for rational investment decision-making, the nature of risk in bond investment is examined briefly in the next section. In the subsequent sections, the prevailing techniques of evaluation of risk will be reviewed and the cash flow simulation model presented.

scholarly journals Animal spirits: Keynes' theory of rational investment decision-making under conditions of fundamental uncertainty

2009 ◽  
Vol 52 (1) ◽  
pp. 17-44
Author(s):  
Ognjen Radonjic
Keyword(s):  
Decision Making ◽  
Economic Crisis ◽  
Investment Decision ◽  
The Other ◽  
Investment Activity ◽  
Animal Spirits ◽  
Investment Decision Making ◽  
Key Factor ◽  
Fundamental Uncertainty ◽  
Rational Investment

Keynes's term, animal spirits, has been mistakenly confused with irrational decision-making. However, if we accept Keynes' assumption that future is fundamentally uncertain and nonergodic, animal spirits become key factor that makes continual process of investment decision-making possible. On the other hand, if animal spirits blunt, investment activity dwindles and makes emergence of deep economic crisis likely.

scholarly journals How Does Important Sustainability Reporting for Investment Decision Making?

2020 ◽  
Vol 3 (4) ◽  
pp. 283
Author(s):  
Sumiyati Sumiyati ◽  
Suhaidar Suhaidar
Keyword(s):  
Decision Making ◽  
Investment Decision ◽  
Sustainability Reporting ◽  
Individual Investors ◽  
Rational Decision ◽  
Rational Decision Making ◽  
Behavior Study ◽  
Investment Decision Making ◽  
Quasi Experimental ◽  
Sustainability Reports

This study was conducted to examine the importance of sustainability reporting for investment decision making by prospective investors using  belief-action-outcome (BAO) theory. This study is a rational investor behavior study in deciding the use of their  assets by explaining it using  Rational Decision Making Model (RDMM) theory.This study used  an online quasi-experimental approach. The respondents of this research were prospective individual investors who understand the use of financial statements to make investments. This research was conducted with two tests. First, test the construct of variables. Second, test the subject's behavior with experiments. As for the experiments carried out two steps namely first, the subjects were given a questionnaire without any sustainability reporting. Second, subjects were given a questionnaire with instructions to read sustainability reporting first.The expected outcome is that investors  tend to choose to buy shares of companies that also attach sustainability reports compared to companies without sustainability reports. Investors also tend to be rational in making decisions. This result showed  the importance of sustainability report in rational decision making.

Investor Biases in Financial Decisions

2015 ◽  
pp. 147-169
Author(s):  
Shalini Kalra Sahi
Keyword(s):  
Decision Making ◽  
Information Processing ◽  
Financial Management ◽  
Investment Decision ◽  
Self Awareness ◽  
Rational Decision ◽  
Net Worth ◽  
Financial Decisions ◽  
Investment Decision Making ◽  
Making Choices

Financial Decisions involve making choices between various investment alternatives, with the aim of increasing the individual's net worth. The investor today is exposed to various investment options, but does not have the knowledge and capability of evaluating all the options and making a rational decision. Due to the limitation in the information processing capacities of the individuals, their beliefs and preferences, the investment decision-making process, gets biased. This chapter highlights ten such biases and throws light on how they impact investment behaviour, both positively and negatively. This understanding of investor psychology will generate insights that will benefit the financial advisory relationship. Further for Individuals, recognizing how the biases impact their financial decisions, can help create self-awareness and an understanding that would help them in better financial management, in case these tendencies are leading them to make unsatisfactory investments.

scholarly journals The Influencing Factors on Decision Investment: Case Study on 5 Mining Firms in 5 Countries in South East Asia

Webology ◽  
2021 ◽  
Vol 18 (Special Issue 03) ◽  
pp. 202-222
Author(s):  
Narumondang Bulan Siregar ◽  
Silvana Fransisca Hutajulu
Keyword(s):  
Decision Making ◽  
Cash Flow ◽  
Firm Size ◽  
Stock Exchange ◽  
Investment Decision ◽  
Secondary Data ◽  
The Philippines ◽  
Annual Reports ◽  
Investment Decision Making ◽  
Stock Exchange Of Thailand

This research aimed is to find out the factors influencing decision-making in mining firms listed in Indonesian Stock Exchange, Bursa Malaysia, the stock Exchange of Thailand, the Philippines Stock Exchange and Singapore Exchange from 2014 to 2018. This study employed multiple linear regression to examine independent variable influences such as cash flow, firm size, leverage and investment opportunities. Total asset growth is the metric used to calculate investment decision. Secondary data were retrieved by the audited Mining Corporation Report and Annual Reports from the Indonesian Stock Exchange, Bursa Malaysia, the Philippines Stock Exchange, the Singapore Exchange and the Stock Exchange of Thailand from 2014 to 2018 in web.idx.id, www.bursamalaysia.com.com, www.pse.com.ph, www.set.or.th and the www2.sgx.com/ The findings suggest that cash flow and firm size have a beneficial impact on investment decision-making, leverage has a detrimental influence on investment decision-making whereas acquisition incentives have little impact on investment decision-making.

scholarly journals Pengambilan Keputusan Investasi Rasional: Suatu Tinjauan dari Dampak Perilaku Representativeness Bias dan Hearding Effect

2021 ◽  
Vol 4 (1) ◽  
pp. 1-13
Author(s):  
Vitmiasih Vitmiasih ◽  
Satia Nur Maharani ◽  
Dwi Narullia
Keyword(s):  
Decision Making ◽  
Data Analysis ◽  
Mixed Method ◽  
Investment Decision ◽  
Negative Influence ◽  
The Other ◽  
Primary Data ◽  
Herding Behavior ◽  
Investment Decision Making ◽  
Rational Investment

The aim of this study was to determine the effect of representation bias and herding behavior towards rational investment decision making, which was detected using the Heuristic Theory perspective on the Investor Saham Pemula (ISP) community in East Java. This research uses a mixed-method by using a sequential explanatory strategy. This study uses primary data obtained by distributing online questionnaires in 10 cities in East Java and interviews with expert practitioners. The sample of this research is 111 active investors who trade independently. In relation, the data analysis was through multiple linear regression. This research succeeded in proving that representative bias behavior has a negative influence on decision-making on rational investment. On the other hand, no evidence showed the effect of herding behavior influencing investment decision making. The phenomenon indicates that investors rely more on information obtained through the results of their own reason rather than following the decisions of other investors.Keywords: Representativeness Bias, Herding-Effect Behavior, Heuristic Theory AbstrakPenelitian ini bertujuan untuk menganalisa pengaruh representativeness bias dan herding behavior terhadap pengambilan keputusan investasi yang rasional yang dideteksi dengan menggunakan perspektif Teori Heuristik pada komunitas Investor Saham Pemula (ISP) di Jawa Timur. Penelitian ini menggunakan metode campuran dilengkapi dengan strategi penjelas berurutan. Studi penelitian ini menggunakan data primer yang diperoleh dengan menyebarkan kuesioner online di 10 kota di Jawa Timur dan wawancara dengan praktisi ahli. Sampel penelitian ini adalah 111 investor aktif yang berdagang secara mandiri. Dalam kaitannya, analisis data dilakukan melalui regresi linier ganda. Penelitian ini berhasil membuktikan bahwa perilaku representativeness bias berpengaruh negatif terhadap pengambilan keputusan atas investasi rasional. Di sisi lain, tidak ada bukti yang menunjukkan pengaruh herding behavior mempengaruhi pengambilan keputusan investasi. Fenomena tersebut mengindikasikan bahwa investor lebih mengandalkan informasi yang diperoleh melalui hasil nalar pribadi dibandingkan mengikuti keputusan investor lain.Kata Kunci: Representativeness Bias, Perilaku Herding-Effect, Teori Heuristic

scholarly journals "What If" Analyses in Investment Decision Making

2012 ◽  
Vol 3 (3) ◽  
pp. 5-16
Author(s):  
Katarína Belanová
Keyword(s):  
Decision Making ◽  
Cash Flow ◽  
Net Present Value ◽  
Investment Decision ◽  
Cash Flows ◽  
Present Value ◽  
Discounted Cash Flow ◽  
Basic Approach ◽  
Investment Decision Making ◽  
Future Cash Flows

In general, each project`s value is estimated using a discounted cash flow (DCF) valuation, and the opportunity with the highest value, as measured by the resultant net present value (NPV) will be selected. The problem with such NPV estimates is that they depend on projected future cash flows. If there are errors in those projections, then estimated net present values can be misleading (a forecasting risk). Basic approach to evaluating cash flow and NPV estimates involves asking “what – if” questions. Accordingly, the paper discusses some organized way s of going about a what – if analysis. Its goal in doing so is to assess the degree of forecasting risk and to identify those elements that are the most critical to the success or failure of an investment. However, as we show in examples, as well as in the practical study, though what – if analysis really allows us to obtain the certain idea of degree of forecasting risk, it does not tell us what to do about the possible errors.

The role of affective reactions on investment decision-making

2007 ◽  
Author(s):  
Enrico Rubaltelli ◽  
Giacomo Pasini ◽  
Rino Rumiati ◽  
Paul Slovic
Keyword(s):  
Decision Making ◽  
Investment Decision ◽  
Affective Reactions ◽  
Investment Decision Making
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