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Moronic Monday – January 04, 2022 – Your Weekly Questions Thread

1 :Anonymous2022/01/04(Tue) 02:00:17ID: rvij03

This is your safe place for questions on financial careers, homework problems and finance in general. No question in the finance domain is unwelcome.

Replies are expected to be constructive and civil.

Any questions about your personal finances belong in

.

3 :Anonymous2022/01/04(Tue) 08:59:11ID: hr6xwz9

I own shares in hxoh. Earlier they announced that they were splitting and I would be issued shares in the new company.

That has now changed, they then announced that portion of the business was being sold to WLK.

Now they have announced that the parent company hxoh is being purchased by American securities, contingent on the WLK sale.

So how does this effect me now? Will I end up with WLK STOCK, and cash from American securities?

edit: PR

ID: hrb8ydx

You will get $30 in cash for each share when it closes. That cash will come from AmSec and the buyers of the debt used to fund the transaction. For you all that matters is the $30/share, though.

4 :Anonymous2022/01/04(Tue) 15:14:10ID: hr7ywu8

I keep hearing strategists saying they expect valuations and the S&P 500 multiple to decline. However, I am hearing positive earnings outlooks and earnings growth. So earnings seem to be rising but the multiple would be shrinking. Looking at the simple math of the P/E multiple, does this simply mean since earnings (denominator) will be higher than the increased price expectations (numerator) , the overall number is coming down?

5 :Anonymous2022/01/04(Tue) 16:52:35ID: hr8dmwv
[deleted]
ID: hr8nlge

the volatility that moves option prices is implied volatility, not realized volatility. Changes in the future distribution of stock prices are not directly inputs into option pricing (there is the potential for arbitrage if implied and realized get too far out of line, but it is expensive to implement and difficult given that realized is not observable ex ante.)

Implied vol is more like a measure of instantaneous supply and demand than what we commonly think of as volatility.

6 :Anonymous2022/01/04(Tue) 19:19:41ID: hr90iyy
[deleted]
ID: hrac0t4

Yes, it would "fail" assuming you're referring to vanilla Black Scholes, as random walk is an assumption to the model.

 

Yes, central limit theorem assumes independent events. Autocorrelation by definition violates that.

ID: hre64vh

I think you need to define more precisely what you mean by "fail" in this context. The black-scholes framework is a risk neutral valuation, so it is independent of the real world probabilities of stock price movement.

The idea is that you can replicate the option exposure with a portfolio of the underlying stock and funds borrowed at the risk-free rate in order to create an instantaneous hedge. In this instantaneous increment, you are perfectly hedged against incremental movement in the price of the underlying stock. While the formula does assume log-normal distribution of price movement in order to calculate the delta for the hedge ratio, simple autocorrelation does not necessarily invalidate the results.

simple AR processes are often described with a "drift" parameter, and this parameter doesn't directly enter into the BS equation so in a first order sense, BS in independent of drift. However, a non-zero drift can impact other parameters of the equation, so it is possible that it could affect pricing in that way.

8 :Anonymous2022/01/05(Wed) 18:16:31ID: hrduznh

This is more of a general finance question:

If tax rates increase, that means if I have a loan that I pay interest on, then I receive a larger tax deduction on the interest expense. Why is it, then, that the larger tax deductions result in cheaper loans? I'm not understanding the logic behind that.

Also, as a side question, do cheaper loans mean cheaper in regards to the principal amount that is given, or the interest payments made on the loan, or something else?

ID: hrhwgvx

Why is it, then, that the larger tax deductions result in cheaper loans?

Not sure what you mean by this. The loans don't necessarily get "cheaper" (see below) but yes the tax deductions do get larger in absolute amounts, but overall you're still paying a bigger tax burden.

do cheaper loans mean cheaper in regards to the principal amount that is given

When people say "cheaper loans" they're usually referring to the interest rate that you're paying on the debt. A higher rate is more expensive.

9 :Anonymous2022/01/05(Wed) 19:09:22ID: hre3vtf

If someone wanted to gift their friend 100k in a check would this be legal?

ID: hrfq0gd

Yes. But you need to either pay gift tax or use a part of the giver’s lifetime tax exemption

10 :Anonymous2022/01/05(Wed) 22:51:58ID: hrf0xug

Really stupid question, but Google didn't give me a good answer.

I am a programmer who is setting up some automated communication between the sales and financial department. While everything user visible is professional... nobody is going to get offended by me using "bean counter" in the backend, right? I don't want to push code with a method named "TellBeanCountersTheSizeOfThisDub" and then discover "bean counter" is a slur.

ID: hrlv5mm

I programmed something to automate our marketing. I named a process "[Name]sBitchyIDs" because the program needed to identify things in a standardized way in order to pass it off to something else downstream.

Now, he/she will never see that, BUT it is technically not very professional. If your workplace is relatively chill, I think it's OK. If you work at a big place or one that's more formal, keep it professional only.

11 :Anonymous2022/01/05(Wed) 23:15:12ID: hrf4mai

What is the appropriate terminology to use when describing financial results without _______. For example, if my firm merged with another but I want to measure the performance of my original firm members only regardless of the merger. The only thing that comes to mind is “sans merger” but there has to be more appropriate terminology?

12 :Anonymous2022/01/06(Thu) 03:08:28ID: hrfwf9s

My wife appears to have transferred what looks like a Roth IRA to a different brokerage in back in 2020 to what looks like a traditional IRA account. I would like to reopen a Roth IRA and transfer that money to it but the website is making it seem as if I will be responsible for paying tax on the “conversion”. Any insight?

ID: hrlvmsq
  1. Double check the transfer was conducted correctly. There's always a chance that the bank/whatever fucked it up. If this is the case, unfortunately, be ready to document things for taxes.
  2. Going from Roth to Traditional is pretty straightforward. Going the other way is much crappier. Traditional IRAs take "pre-tax" money, and so "withdrawing" that and putting into an "after-tax" account would basically mean, to the IRS's point of view, "hey, this money isn't taxed and it should be!" It also lets the IRS say "hey! this is supposed to be for retirement! You're abusing the system! Withdrawal penalty for you!" Hence why point 1 is super important here.
  3. Consider, in either case, an accountant or financial advisor to help.
13 :Anonymous2022/01/06(Thu) 08:12:32ID: hrgtl5y

Hello everyone and sorry for my English( I am not native). I have an exam coming up about finance. It will be about annuities and perpetuities and etc. Teacher allowed to download an financial calculator to our mobile and use it in the exam( since I am leaving in third world country and one financial calculator costs as much as 1/3 of minimum wage). Is there a free application that you know and u can help me little bit on how to use it if u have time. Thank you for reading. Have a good day

14 :Anonymous2022/01/06(Thu) 15:36:44ID: hri37zm

What am I missing with covered call income ETFs? (eg. NUSI)

They obviously return less than market, but they also seem to return much higher than a bond of similar risks - and from the AAA MBSs/ABSs of 2008 I swear something like this is just too good to be true, no?

ID: hriw0vq

The risk of selling covered calls is that you won't get the full benefit of the underlying security rising in value. Instead, the underlying security will be 'called away' at the strike price.

The more sharply the market rises, the more NUSI will be left behind.

ID: hrlvvhr

Bond yields are rather disgustingly low right now, and covered call strategies are thus able to provide relatively attractive income. This comes as the cost of upside and, as a result, arguably total return is impacted pretty negatively.

15 :Anonymous2022/01/06(Thu) 23:54:21ID: hrkbvo6

I accidentally exceeded the 401K max of $58,000 between maxing the 401k contributions for 2021, PSP and 401K matching. I'm told that everything over $58,000 is lost. I'm calculating that I should have $19,500 from my contribution, $12,000 from match and $48,000 for a total of ~$80K. Does this mean I lose the difference? Did last year's PSP count towards 2021 retirement or 2022 retirement if it gets paid out later this year?

ID: hrlw17r

No, no one, not your employer, not the government, etc. can just swoop in and take your money without due cause and process. You may need to withdraw the amount over the limit, and there may be some penalties involved, but you're going to need to talk to your employer ASAP.

16 :Anonymous2022/01/07(Fri) 08:44:38ID: hrm4axz

What happened to the Northern Pacific Ry 3s that mature in 2047?

The collateral was worth billions, apparently, and I see some news articles from 1986 online saying that the company wanted to separate the collateral from the bonds...

Does anyone know about this?

17 :Anonymous2022/01/07(Fri) 19:29:27ID: hroeboi

Would gold ever become worthless, or close to its price dictated purely by industrial demand? Say governments and large cash cows suddenly start selling their Gold reserves, causing its price to deteriorate. Would this ever be a possible scenario? Are there any incentives that you can think of to have Gold's value crash (Political reasons, etc)?

ID: hrsv3k0

anything could happen, but in thousands of years of human history across many civilizations this has not happened so far. Also keep in mind that gold has value beyond it's industrial uses - it's shiny and people like to make jewelry out of it.

18 :Anonymous2022/01/07(Fri) 22:36:28ID: hrp85uh

Hey, everyone!

I have a question about filing an 83(b). I received a stock grant, but haven't exercised early yet. Does the 83(b) countdown start at the time of the grant or the time of the transfer (I'm under the assumption transfer refers to exercising/purchasing)?

Thank you!

19 :Anonymous2022/01/08(Sat) 00:48:09ID: hrprk79

I'm wondering if someone can suggest some portfolio trackers and somewhere I can calculate my mutual fund sip returns since I started investing? Thanks

20 :Anonymous2022/01/08(Sat) 21:00:59ID: hrtp12s

JP Morgan Risk Management summer analyst question ( just a generic question about IB Risk management)

Hi! So I’m a college student studying industrial engineering that surprisingly got past this stage to a risk management superday coming in 1 week. However I mostly applied to these positions because I still am not sure what I want to do but I enjoy everything from engineering to data science to finance. I’ve been looking at mostly data science/ analysis recently. I looked at the different risk teams that JP Morgan offers and I saw CTC, country, credit and market teams. I know some finance that I primarily studied by myself out of interest and I invest and keep up with the market regularly. Are there any teams that focus a little more on data or data science or is the best way to prepare to review finance. Any other tips would be appreciated ! Also anyone who jsut knows information about risk management internships in general :))

22 :Anonymous2022/01/09(Sun) 22:04:31ID: hrz27n9
[deleted]
ID: hs2u5sr

Go to YouTube and watch him say it.

23 :Anonymous2022/01/10(Mon) 04:38:06ID: hs0q7fe

Dumb question. I'm doing research on government bonds and honestly know nothing about bonds lol. Does this chart mean that holding a Costa Rican bond would yield an annual interest rate of 10% on average, or that over the course of 10 years holding that bond would result in a 10% interest earned in totality at the end of the bond when the original amount is returned?

24 :Anonymous2022/01/10(Mon) 18:14:15ID: hs3dn1w

Does psychology play a big role in determining market trends? And do firms often rely on psychology when making trades?

25 :Anonymous2022/01/10(Mon) 18:23:09ID: hs3f3f0

Hi! I have a finance assignment tomorrow which I’ll need help with. Just checking that it’s within the rules to ask questions on here?

26 :Anonymous2022/01/10(Mon) 19:45:12ID: hs3so3n

Why would a credit card application ask if I'm a stock / shareholder?

27 :Anonymous2022/01/11(Tue) 02:01:51ID: hs5e4hb

I was looking at cars online out of boredom and came across a car finance calculator. I was confused as to the numbers it was giving me, and hope to get some help.
The price I put in for the car was $69,895
I set the down payment to be zero
The APR was 5%, 60 month finance.
The final cost $79,140 which struck me as high since 69,895*1.05=73,389.
I'm guessing I just don't understand exactly how the APR works, and hope someone can explain it better to me.

引用元:https://www.reddit.com/r/finance/comments/rvij03/moronic_monday_january_04_2022_your_weekly/