https://gdpark.blog/categories/finance/Recent content in Finance on gdpark.blogHugoenThu, 26 Sep 2019 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-01-introduction-to-corporate-finance/Sat, 15 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-01-introduction-to-corporate-finance/A reluctant double-major’s crash course in corporate finance — covering fund procurement, investment decisions, dividend policy, and the agency problem, all with honest student energy.https://gdpark.blog/posts/derivatives-01-introduction-to-derivatives/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-01-introduction-to-derivatives/Kicking off a derivatives series with a skim of Hull Chapter 1 — futures vs. options, hedging vs. speculation, and the quiz-first study method.https://gdpark.blog/posts/financial-engineering-01-call-options-put-options/Thu, 01 Sep 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-01-call-options-put-options/A casual dive into call and put options — what they actually mean, why Black–Scholes blew the market wide open, and yes, there’s a dropped-class backstory involved.https://gdpark.blog/posts/microeconomics-01-introduction-to-microeconomics/Sun, 03 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-01-introduction-to-microeconomics/I lost faith in traditional economics after reading The Origin of Wealth, but I’m studying micro anyway — someone has to know the old framework before they can fix it.https://gdpark.blog/posts/basic-investing-01-overview-of-basic-investing/Tue, 29 Mar 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-01-overview-of-basic-investing/A no-fluff rundown of investing basics — what markets actually do, asset allocation vs. security selection, the EMH, and money market instruments like T-bills and CDs.https://gdpark.blog/posts/macroeconomics-01-goods-market-and-the-short-term-model/Sun, 10 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-01-goods-market-and-the-short-term-model/Finally diving into real macro — breaking down GDP composition, inventory vs. fixed investment, and the consumption function from Blanchard Chapter 3.https://gdpark.blog/posts/money-banking-01-why-study-money-and-banking/Thu, 25 Jun 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-01-why-study-money-and-banking/Casually skimmed then carefully re-read Ch. 1–2 of money & banking — vocab check on stocks, bonds, debt instruments, and short-term money market tools!https://gdpark.blog/posts/corporate-finance-02-time-value-of-money/Sat, 15 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-02-time-value-of-money/A fun, casual walkthrough of time value of money concepts — future value, present value, and the compound value interest factor (CVIF) explained with zero boring.https://gdpark.blog/posts/derivatives-02-structure-of-futures-markets/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-02-structure-of-futures-markets/A Q&A rundown of futures market basics — open interest, margin calls, stop vs. limit orders, and how hedgers and speculators get taxed differently.https://gdpark.blog/posts/financial-engineering-02-intrinsic-value-time-value-of-options/Thu, 01 Sep 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-02-intrinsic-value-time-value-of-options/Option value splits into two pieces — intrinsic value (the profit you’d lock in right now) and time value (all that probabilistic could-happen-later stuff) — here’s how they work.https://gdpark.blog/posts/microeconomics-02-endogenous-and-exogenous-variables/Sun, 03 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-02-endogenous-and-exogenous-variables/A fun, breezy breakdown of endogenous vs. exogenous variables — think exam scores, study hours, and yes, a girlfriend shifting your efficiency curve upward by h.https://gdpark.blog/posts/basic-investing-02-stock-market-indices/Tue, 29 Mar 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-02-stock-market-indices/Breaking down what stock market indices actually are — Dow Jones, S&P 500, NYSE, NASDAQ — how they’re calculated, and why the jump from a plain average to a weighted one matters.https://gdpark.blog/posts/macroeconomics-02-financial-markets/Sun, 10 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-02-financial-markets/We dig into the financial market — breaking down money demand, interest rates, and why splitting it from the goods market makes sense before we smash it all back into AD.https://gdpark.blog/posts/money-banking-02-the-money-supply-process/Fri, 26 Jun 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-02-the-money-supply-process/A casual rundown of Chapter 15 — breaking down the Fed’s balance sheet, monetary base, reserves, and how open market operations move the money supply!!!https://gdpark.blog/posts/corporate-finance-03-capital-markets-and-financial-assets/Sun, 16 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-03-capital-markets-and-financial-assets/A casual breakdown of financial markets, covering capital vs. money markets, issuing markets, and the two main underwriting methods taught in financial management class.https://gdpark.blog/posts/derivatives-03-hedging-strategies-using-futures/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-03-hedging-strategies-using-futures/A quiz-style walkthrough of futures hedging — short vs long hedges, basis risk, optimal hedge ratios, and beta reduction with index futures.https://gdpark.blog/posts/derivatives-03-linear-regression-in-finance/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-03-linear-regression-in-finance/A from-scratch derivation of linear regression — why we square the errors, how to find the best-fit slope and intercept, and why this shows up everywhere in finance.https://gdpark.blog/posts/financial-engineering-03-put-call-parity/Wed, 07 Sep 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-03-put-call-parity/Before jumping into the binomial model, we lock in put-call parity — the neat reason knowing a European call’s price automatically pins down its put, and vice versa.https://gdpark.blog/posts/microeconomics-03-demand-curve-and-supply-curve/Sun, 03 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-03-demand-curve-and-supply-curve/We build the demand curve from scratch using red ginseng as our example market, then unpack the law of demand plus direct vs. derived demand — heh heh.https://gdpark.blog/posts/basic-investing-03-ipo-and-order-types/Sat, 02 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-03-ipo-and-order-types/A breakdown of how IPOs actually work — from primary vs. secondary markets to road shows, bookbuilding, and why playing it cool at an IPO is a bad idea.https://gdpark.blog/posts/macroeconomics-03-is-curve-and-lm-curve/Mon, 11 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-03-is-curve-and-lm-curve/Finally deriving the IS and LM curves for real — dropping the constant-investment assumption and sketching out equilibrium in both the goods and financial markets!https://gdpark.blog/posts/money-banking-03-tools-of-monetary-policy/Fri, 26 Jun 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-03-tools-of-monetary-policy/Breaking down the 4 monetary policy tools the Fed uses to nail its target federal funds rate, and why it all plays out in the reserves market!https://gdpark.blog/posts/corporate-finance-04-valuation-of-bonds-and-stocks/Sun, 16 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-04-valuation-of-bonds-and-stocks/Breaking down how to slap a price tag on bonds and stocks using present value formulas — and yes, yield to maturity is just as annoying to solve as it sounds.https://gdpark.blog/posts/derivatives-04-interest-rates/Thu, 13 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-04-interest-rates/A worked-through tour of the interest rate zoo — compounding conventions, LIBOR vs LIBID, spot and forward rates, FRAs, and bond pricing, all with quiz solutions.https://gdpark.blog/posts/financial-engineering-04-binomial-model-one-period/Mon, 03 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-04-binomial-model-one-period/The one-period binomial model in a nutshell — stock goes up or down, we build a risk-free portfolio, and derive the hedge ratio Δ and call option price.https://gdpark.blog/posts/microeconomics-04-equilibrium/Wed, 13 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-04-equilibrium/Turns out economic equilibrium is a dynamic concept — and it clicks way easier once you see it’s basically the same thing as thermal equilibrium in physics.https://gdpark.blog/posts/basic-investing-04-buying-on-margin-and-short-sales/Sun, 03 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-04-buying-on-margin-and-short-sales/A casual breakdown of how buying on margin works — borrowing from your broker to buy stocks, why margin calls happen, and why losses hurt way more than gains feel good.https://gdpark.blog/posts/macroeconomics-04-medium-term-analysis-labor-market/Mon, 11 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-04-medium-term-analysis-labor-market/We’re done with the short-term goods and financial markets — now we crack open the medium term, which means the labor market and figuring out how wages actually get determined.https://gdpark.blog/posts/money-banking-04-conducting-monetary-policy-strategy-and-tactics/Fri, 26 Jun 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-04-conducting-monetary-policy-strategy-and-tactics/A breezy rundown of how central banks juggle inflation targeting, the time-inconsistency problem, and a whole laundry list of goals beyond just price stability!https://gdpark.blog/posts/corporate-finance-05-liquidity-management-and-capital-budgeting-overview/Sun, 16 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-05-liquidity-management-and-capital-budgeting-overview/A no-frills terminology dump on liquidity management, working capital, and financing policies — because these chapters sure aren’t giving us any practical how-tos. T_Thttps://gdpark.blog/posts/derivatives-05-determining-forward-and-futures-prices/Sat, 15 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-05-determining-forward-and-futures-prices/A quiz-style rundown of how forward and futures prices actually work — short selling, convenience yield, cost of carry, and why copper isn’t gold.https://gdpark.blog/posts/financial-engineering-05-binomial-model-two-period/Mon, 03 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-05-binomial-model-two-period/Extending the one-period binomial model to two periods — turns out it’s the same trick applied twice, and the binomial weights just fall right out naturally.https://gdpark.blog/posts/microeconomics-05-types-of-elasticity/Wed, 13 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-05-types-of-elasticity/Elasticity isn’t the same as a derivative — here’s why, plus a breakdown of price elasticity of demand and why the value can differ at every single point on the curve.https://gdpark.blog/posts/basic-investing-05-mutual-funds/Sun, 03 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-05-mutual-funds/A casual breakdown of what investment companies actually are, how they’re classified, and why mutual funds ended up eating unit investment trusts’ lunch.https://gdpark.blog/posts/macroeconomics-05-wage-setting-and-price-setting/Tue, 12 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-05-wage-setting-and-price-setting/Picking up where we left off, we graph wage setting and price setting curves to nail down the natural unemployment rate — and yeah, it basically all comes down to markup.https://gdpark.blog/posts/money-banking-05-foreign-exchange-markets-and-exchange-rates/Sun, 28 Jun 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-05-foreign-exchange-markets-and-exchange-rates/A casual intro to foreign exchange markets — covering why exchange rates matter, spot vs. forward transactions, OTC trading, and how long/short-term rates are determined.https://gdpark.blog/posts/corporate-finance-06-cash-flow-estimation/Sun, 04 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-06-cash-flow-estimation/A casual walkthrough of cash flow estimation for investment evaluation — covering incremental flows, opportunity costs, sunk costs, depreciation, and more.https://gdpark.blog/posts/derivatives-06-interest-rate-futures/Wed, 19 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-06-interest-rate-futures/Working through quiz problems on T-bond accrued interest, conversion factors, Eurodollar futures P&L, convexity adjustments, and duration-based portfolio hedging.https://gdpark.blog/posts/financial-engineering-06-binomial-model-generalized-n-period/Mon, 03 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-06-binomial-model-generalized-n-period/We tackle the scary-looking generalized n-period binomial formula and break it down piece by piece — p, u, d, sigma notation and all.https://gdpark.blog/posts/microeconomics-06-long-run-and-short-run-elasticity/Wed, 13 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-06-long-run-and-short-run-elasticity/Elasticity isn’t a fixed number — oil demand can be inelastic short-term but flip elastic long-run, and durable goods like airplanes can do the exact opposite.https://gdpark.blog/posts/basic-investing-06-types-of-portfolio-average-returns/Mon, 04 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-06-types-of-portfolio-average-returns/A rundown of the different flavors of portfolio average return — arithmetic, geometric (time-weighted), and dollar-weighted — and when each one makes sense to use.https://gdpark.blog/posts/macroeconomics-06-deriving-the-aggregate-demand-and-aggregate-supply-curves/Tue, 12 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-06-deriving-the-aggregate-demand-and-aggregate-supply-curves/Mashing together the short-run goods/financial markets and the medium-run labor market to derive the AD and AS curves — and spoiler: it still can’t explain inflation lol.https://gdpark.blog/posts/money-banking-06-the-international-financial-system/Tue, 30 Jun 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-06-the-international-financial-system/We’re diving into how central banks intervene in the forex market — buying or selling foreign reserves to move the monetary base, interest rates, and ultimately the exchange rate.https://gdpark.blog/posts/corporate-finance-07-economic-feasibility-evaluation-of-investment-projects/Mon, 19 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-07-economic-feasibility-evaluation-of-investment-projects/A rundown of the 6 methods for evaluating investment cash flows — from ARR and payback period to NPV — complete with worked examples and each method’s sneaky strengths and weaknesses.https://gdpark.blog/posts/derivatives-07-fundamentals-of-interest-rate-swaps/Wed, 19 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-07-fundamentals-of-interest-rate-swaps/A casual walkthrough of how interest rate swaps actually work — fixed vs. floating rates, notional principal, and why companies would sign up for this in the first place.https://gdpark.blog/posts/financial-engineering-07-american-options/Mon, 03 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-07-american-options/Breaking down the one chunky difference between American and European options — early exercise — and how it flips the whole binomial pricing tree on its head.https://gdpark.blog/posts/microeconomics-07-estimating-demand-and-supply-curves/Thu, 14 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-07-estimating-demand-and-supply-curves/Using elasticity plus a few starred averages pulled from real data, we cook up an approximate linear demand (or supply) curve without having to derive it from scratch.https://gdpark.blog/posts/basic-investing-07-statistical-theory-risk-and-risk-premium/Mon, 04 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-07-statistical-theory-risk-and-risk-premium/A casual dive into the stats behind investment returns — scenarios, expected value, variance, and why the Gaussian is kind of a big deal.https://gdpark.blog/posts/macroeconomics-07-aggregate-supply-aggregate-demand-analysis/Wed, 13 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-07-aggregate-supply-aggregate-demand-analysis/A deep dive into AS-AD analysis — tracing exactly what happens to equilibrium when M drops, G rises, or firms jack up their markup, step by step.https://gdpark.blog/posts/money-banking-07-quantity-theory-of-money-inflation-and-money-demand-keynes-a/Tue, 30 Jun 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-07-quantity-theory-of-money-inflation-and-money-demand-keynes-a/From Irving Fisher’s velocity of money to Keynes’s Liquidity Preference Theory — a casual breakdown of how money supply, interest rates, and GDP all connect.https://gdpark.blog/posts/corporate-finance-08-risk-and-project-selection-dominance-principle-and-return-ri/Mon, 19 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-08-risk-and-project-selection-dominance-principle-and-return-ri/A chill walkthrough of how risk is actually just quantified volatility — using probability distributions, expected returns, and variance to figure out which projects are worth picking.https://gdpark.blog/posts/derivatives-08-swaps/Mon, 21 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-08-swaps/A casual breakdown of how interest rate swaps work — exchanging fixed and floating payments on a notional principal, and why anyone would actually do that.https://gdpark.blog/posts/financial-engineering-08-wiener-process/Mon, 03 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-08-wiener-process/Can’t derive Black-Scholes and not even gonna try — instead we’re just coding it up while taking a detour through Brownian motion and Geometric Brownian Motion.https://gdpark.blog/posts/microeconomics-08-preferences/Thu, 14 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-08-preferences/A casual intro to consumer choice theory — breaking down what a ‘basket’ is, why we pretend only two goods exist, and the ‘more is better’ axiom.https://gdpark.blog/posts/basic-investing-08-inflation-indexed-bonds-tips/Mon, 04 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-08-inflation-indexed-bonds-tips/Real vs. nominal interest rates, the Fisher equation, and a quick intro to TIPS — the inflation-protected bond that hands you the truly risk-free rate.https://gdpark.blog/posts/macroeconomics-08-the-phillips-curve-unemployment-and-inflation/Wed, 13 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-08-the-phillips-curve-unemployment-and-inflation/Diving into the Phillips curve — why the unemployment-inflation trade-off was such a big deal, how we derive it from scratch, and why it totally fell apart in the 70s.https://gdpark.blog/posts/money-banking-08-the-is-curve/Wed, 01 Jul 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-08-the-is-curve/Breaking down the IS curve — which maps the real interest rate to national income in goods-market equilibrium — because you’d better know this one well!https://gdpark.blog/posts/corporate-finance-09-portfolio-variance-and-covariance-matrix/Mon, 19 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-09-portfolio-variance-and-covariance-matrix/We level up from single-stock picking to full portfolio selection — figuring out how to compute a portfolio’s μ and σ using the covariance matrix.https://gdpark.blog/posts/derivatives-09-swaps-practice-problems/Tue, 22 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-09-swaps-practice-problems/Working through classic swap design problems — comparative advantage, LIBOR discounting, and currency swaps — with the actual numbers worked out step by step.https://gdpark.blog/posts/financial-engineering-09-monte-carlo-method/Thu, 20 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-09-monte-carlo-method/Stumbled into a stats lecture and finally got it — turns out if you scatter enough random dots and do a little ratio math, you can actually calculate π. Wild, right?https://gdpark.blog/posts/microeconomics-09-indifference-curves-and-utility-functions/Thu, 14 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-09-indifference-curves-and-utility-functions/We get into indifference curves and utility functions — why some baskets make you equally happy, and why piling on more stuff gives you less of a kick each time.https://gdpark.blog/posts/basic-investing-09-capital-allocation-line-cal/Tue, 05 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-09-capital-allocation-line-cal/How slicing your cash between the spicy risky stuff and the boring risk-free stuff moves your expected return and volatility — that’s the Capital Allocation Line.https://gdpark.blog/posts/macroeconomics-09-okun-s-law/Thu, 14 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-09-okun-s-law/We finally tackle Okun’s Law — the bridge between economic growth and unemployment that sets us up to fix the inflation gap in our AD-AS model.https://gdpark.blog/posts/money-banking-09-the-mp-curve-and-the-ad-curve/Wed, 01 Jul 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-09-the-mp-curve-and-the-ad-curve/We’re diving into the MP curve — how central banks fiddle with nominal rates to steer real interest rates — then combining it with the IS curve to derive the AD curve!!https://gdpark.blog/posts/corporate-finance-10-minimum-variance-portfolio/Tue, 20 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-10-minimum-variance-portfolio/Walks through how diversifying stocks makes individual risk basically vanish while covariance dominates, with a hands-on two-stock example using correlation coefficients 0, 1, and -1.https://gdpark.blog/posts/derivatives-10-options/Mon, 28 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-10-options/A casual intro to options — call vs. put, why theoretical prices even matter, and how Black-Scholes blew the whole market wide open.https://gdpark.blog/posts/financial-engineering-10-black-scholes-formula/Thu, 20 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-10-black-scholes-formula/Can’t derive it (lmao), but we can totally code it up — walking through the Black-Scholes pricing formula and computing actual call and put prices.https://gdpark.blog/posts/microeconomics-10-marginal-rate-of-substitution/Thu, 14 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-10-marginal-rate-of-substitution/MRS is basically something we already know deep down — here’s why ∆y is always negative on the indifference curve, plus a Coke vs. Pepsi reality check on diminishing MRS.https://gdpark.blog/posts/basic-investing-10-diversification/Fri, 15 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-10-diversification/More stocks = less risk, but only up to a point — turns out there’s this pesky market risk that no amount of diversification can ever kill.https://gdpark.blog/posts/macroeconomics-10-stylized-facts-of-economic-growth/Thu, 14 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-10-stylized-facts-of-economic-growth/We’re finally zooming out to the long run — why do some countries keep winning? Enter Solow’s aggregate production function Y = F(K, N), and the real fun begins.https://gdpark.blog/posts/money-banking-10-the-as-curve-aggregate-supply-curve/Wed, 01 Jul 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-10-the-as-curve-aggregate-supply-curve/A casual, student-eye-view breakdown of the AS curve — why output and inflation move together and what short-run vs. long-run aggregate supply actually means.https://gdpark.blog/posts/corporate-finance-11-efficient-frontier-markowitz/Wed, 21 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-11-efficient-frontier-markowitz/We dive into the Markowitz efficient frontier — plotting every possible portfolio combo in expected return vs. standard deviation space to find the best bang for your risk buck.https://gdpark.blog/posts/derivatives-11-properties-of-stock-options/Mon, 28 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-11-properties-of-stock-options/Breaking down every variable that moves option prices — S, K, T, σ, r, and D — and why European vs. American options handle time to expiration differently.https://gdpark.blog/posts/financial-engineering-11-volatility/Thu, 20 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-11-volatility/Breaking down historical and implied volatility — what they are, why we care, and how to actually compute historical vol from weekly price data in VBA.https://gdpark.blog/posts/microeconomics-11-special-utility-functions/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-11-special-utility-functions/We dive into the ‘special cases’ where diminishing marginal utility just doesn’t apply — perfect substitutes and perfect complements, with all their quirks!https://gdpark.blog/posts/basic-investing-11-sources-of-various-risks/Sat, 16 Apr 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-11-sources-of-various-risks/Excess return broken down into three buckets: market vibes (β), totally-unpredictable company drama (e), and that mysterious security alpha (α).https://gdpark.blog/posts/macroeconomics-11-the-relationship-between-savings-rate-and-output/Fri, 15 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-11-the-relationship-between-savings-rate-and-output/We dig into how the savings rate connects to capital per person — and why that matters for output, with a quick detour through flow vs. stock.https://gdpark.blog/posts/money-banking-11-aggregate-supply-and-aggregate-demand/Thu, 02 Jul 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-11-aggregate-supply-and-aggregate-demand/We’re throwing AD and AS together on one graph, diving into equilibrium, output gaps, and how the self-correcting mechanism handles demand and supply shocks!!https://gdpark.blog/posts/corporate-finance-12-capital-asset-pricing-model-capm/Wed, 21 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-12-capital-asset-pricing-model-capm/We pick up where Markowitz left off, toss in a risk-free asset, find the one tangent point that becomes the Market Portfolio, and see why the S&P 500 basically fits the bill.https://gdpark.blog/posts/derivatives-12-options-practice-problems/Mon, 28 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-12-options-practice-problems/Working through options pricing problems — lower bounds on calls and puts, why American options always beat intrinsic value, and when put-call parity breaks down.https://gdpark.blog/posts/financial-engineering-12-midterm-exam-review/Thu, 17 Nov 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-12-midterm-exam-review/A visual midterm exam review covering options Greeks like delta and gamma, dynamic delta hedging strategies, and related VBA concepts.https://gdpark.blog/posts/microeconomics-12-utility-maximization/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-12-utility-maximization/Mr. Nodap’s got 10,000 won and a choice between booze and smokes — here’s how utility curves and the budget line team up to nail the one combo that maxes him out.https://gdpark.blog/posts/basic-investing-12-efficient-market-hypothesis-emh/Wed, 11 May 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-12-efficient-market-hypothesis-emh/How economists took Kendall’s ‘prices are random’ bombshell and flipped it into the EMH — keeping the ‘humans are rational’ assumption perfectly intact.https://gdpark.blog/posts/macroeconomics-12-the-cobb-douglas-production-function/Fri, 15 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-12-the-cobb-douglas-production-function/We finally pin down that vague f(K/N) with the Cobb-Douglas production function and crank through the math to get a concrete steady-state output formula.https://gdpark.blog/posts/money-banking-12-monetary-policy-theory/Thu, 02 Jul 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-12-monetary-policy-theory/A casual breakdown of the activist vs. nonactivist debate in monetary policy — why deflation is scarier than it sounds, and how central banks chase that ~1–3% inflation sweet spot.https://gdpark.blog/posts/corporate-finance-13-cost-of-capital/Wed, 21 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-13-cost-of-capital/Before diving into capital structure theory, let’s get the basics straight — cost of debt, cost of equity, and why k is the discount rate that actually matters.https://gdpark.blog/posts/derivatives-13-options-trading-strategies-part-1-spreads-bull-spread-bear-s/Wed, 14 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-13-options-trading-strategies-part-1-spreads-bull-spread-bear-s/We finally stop staring at one lonely option and start building real portfolios — covered calls, protective puts, and every spread you’d want to know.https://gdpark.blog/posts/financial-engineering-13-implied-volatility/Fri, 09 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-13-implied-volatility/Flip the BS formula backwards — plug in the real market price, leave σ blank, and whatever volatility makes it work? That’s implied volatility, baby.https://gdpark.blog/posts/microeconomics-13-utility-maximization-with-special-utility-functions/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-13-utility-maximization-with-special-utility-functions/We knock out utility maximization for two funky non-Cobb-Douglas functions — one with a surprising shape and one for perfect substitutes — and spoiler: both consumers go all-in on x!https://gdpark.blog/posts/basic-investing-13-behavioral-finance/Thu, 12 May 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-13-behavioral-finance/Behavioral finance argues human irrationality — forecast errors, overconfidence, conservatism bias — actually moves markets in ways the efficient market hypothesis can’t explain.https://gdpark.blog/posts/macroeconomics-13-solow-residual-a-macroeconomic-approach-to-technological-pro/Sat, 16 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-13-solow-residual-a-macroeconomic-approach-to-technological-pro/We finally stop pinning labor productivity A at 1, bundle it with N into ’effective labor’ AN, and roll into the Solow residual framework for thinking about tech progress.https://gdpark.blog/posts/money-banking-13-money-and-banking-at-a-glance-series-overview/Thu, 02 Jul 2015 00:00:00 +0000https://gdpark.blog/posts/money-banking-13-money-and-banking-at-a-glance-series-overview/A visual series overview covering the essentials of money and banking — everything you need to get up to speed fast.https://gdpark.blog/posts/corporate-finance-14-capital-structure-theory-and-the-modigliani-miller-theorem/Thu, 22 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/corporate-finance-14-capital-structure-theory-and-the-modigliani-miller-theorem/We break down capital structure theory — from the traditional approach to MM (1958) and modified MM (1963) — and why minimizing WACC is the whole game.https://gdpark.blog/posts/derivatives-14-options-trading-strategies-part-2-combinations-and-practice/Wed, 14 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-14-options-trading-strategies-part-2-combinations-and-practice/Wrapping up options combinations — straddles, strangles, strips, and straps — and figuring out which one to pick depending on your vol view and your wallet.https://gdpark.blog/posts/financial-engineering-14-bisection-method-weighted-bisection-method/Sun, 11 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-14-bisection-method-weighted-bisection-method/A super chill walkthrough of the bisection method — arguably the simplest root-finding algorithm ever — plus a weighted twist, with Python code and visuals.https://gdpark.blog/posts/microeconomics-14-utility-maximization-with-coupons-and-subsidies/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-14-utility-maximization-with-coupons-and-subsidies/Walking through how government housing subsidies mess with your budget line — turns out it’s not as scary as it sounds, just a little funky shaped.https://gdpark.blog/posts/basic-investing-14-debt-securities/Tue, 24 May 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-14-debt-securities/A casual grand tour of bond basics — types, coupons, bearer bonds, and why YTM is the number issuers actually care about.https://gdpark.blog/posts/macroeconomics-14-the-real-interest-rate/Sat, 16 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-14-the-real-interest-rate/Breaking down why expectations run the whole economy, then working through how nominal and real interest rates actually connect — spoiler: bread prices are doing a lot of work.https://gdpark.blog/posts/derivatives-15-binomial-option-pricing-model-basics/Wed, 14 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-15-binomial-option-pricing-model-basics/A copy-paste deep dive into the binomial option pricing model — covering one-period basics, risk-free portfolios, and how to pin down a call option’s theoretical price.https://gdpark.blog/posts/financial-engineering-15-newton-raphson-method/Mon, 12 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-15-newton-raphson-method/We ditch bisection and let Newton-Raphson chase down implied volatility by hopping along tangent lines until it zeros in on the answer.https://gdpark.blog/posts/microeconomics-15-utility-maximization-under-a-membership-scheme/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-15-utility-maximization-under-a-membership-scheme/A fun walkthrough of how a membership fee shifts your budget line — and why some people are actually better off never joining in the first place.https://gdpark.blog/posts/basic-investing-15-bond-valuation-and-risk/Tue, 24 May 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-15-bond-valuation-and-risk/We actually price a bond this time — figuring out what it’s worth today by adding up the present value of all those future coupon payments.https://gdpark.blog/posts/macroeconomics-15-short-run-and-medium-run-analysis-with-the-real-interest-rat/Sun, 17 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-15-short-run-and-medium-run-analysis-with-the-real-interest-rat/We patch up the IS-LM model to use r instead of i, then show why the medium-run always lands at Wicksell’s natural real interest rate r(n).https://gdpark.blog/posts/derivatives-16-deriving-the-black-scholes-formula-from-the-binomial-model/Thu, 15 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-16-deriving-the-black-scholes-formula-from-the-binomial-model/Turns out if you just crank n to infinity in the binomial model, the Black-Scholes formula pops right out — so let’s do exactly that instead of going the hard way.https://gdpark.blog/posts/financial-engineering-16-differentiation-fundamentals-for-finite-difference-methods/Mon, 12 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-16-differentiation-fundamentals-for-finite-difference-methods/Before we can tackle FDM and crack open the Black-Scholes PDE numerically, we need to get our differentiation fundamentals straight — so let’s run through it.https://gdpark.blog/posts/microeconomics-16-utility-maximization-with-savings-and-loans/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-16-utility-maximization-with-savings-and-loans/We tackle the last weird budget line — loans let you borrow against next year’s income, savings stack up interest, and the slope ties it all together.https://gdpark.blog/posts/basic-investing-16-duration-and-modified-duration/Tue, 24 May 2016 00:00:00 +0000https://gdpark.blog/posts/basic-investing-16-duration-and-modified-duration/We crack open basic calculus to see exactly how bond prices react when interest rates move — and that’s what leads us straight to the definition of duration.https://gdpark.blog/posts/macroeconomics-16-expected-present-discounted-value/Sun, 17 Jan 2016 00:00:00 +0000https://gdpark.blog/posts/macroeconomics-16-expected-present-discounted-value/So what’s a future stream of payments actually worth right now? We walk through present value, discount factors, and interest rates — the stuff you kinda already know.https://gdpark.blog/posts/derivatives-17-black-scholes-formula-practice-problems/Fri, 16 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-17-black-scholes-formula-practice-problems/Working through Chapter 13 Black-Scholes practice problems — from log-normal returns and Geometric Brownian Motion to actually pricing European call options.https://gdpark.blog/posts/financial-engineering-17-explicit-finite-difference-method-fdm/Tue, 13 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-17-explicit-finite-difference-method-fdm/Can’t solve Black-Scholes analytically? No sweat — we slice the (t, S) plane into a grid, lock down the boundary values, and sneak our way to the rest one point at a time.https://gdpark.blog/posts/microeconomics-17-price-consumption-curve-and-demand-curve/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-17-price-consumption-curve-and-demand-curve/We trace what happens when the price of good x keeps dropping, connect all the utility-maximizing bundles into a price consumption curve, and boom — that’s literally where the demand curve comes from.https://gdpark.blog/posts/derivatives-18-stock-index-options-and-currency-options/Fri, 16 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-18-stock-index-options-and-currency-options/Extending Black-Scholes to handle dividends, stock index options, and currency options — turns out it’s basically the same trick each time.https://gdpark.blog/posts/financial-engineering-18-implicit-finite-difference-method-fdm/Tue, 13 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-18-implicit-finite-difference-method-fdm/A walkthrough of Implicit FDM and how swapping to a forward time difference turns the Black-Scholes PDE into a system you solve backwards — algebra included, sanity optional.https://gdpark.blog/posts/microeconomics-18-engel-curve-and-income-consumption-curve/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-18-engel-curve-and-income-consumption-curve/We derive the income consumption curve and Engel curve step by step, then use their shapes to figure out whether a good is normal or inferior — think ramen vs. electricity.https://gdpark.blog/posts/derivatives-19-stock-index-options-and-currency-options-practice-problems/Sat, 17 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-19-stock-index-options-and-currency-options-practice-problems/Practice problems on currency and stock index options — lower bounds, put-call parity, Black-Scholes puts, and hedging a portfolio with index puts.https://gdpark.blog/posts/financial-engineering-19-lu-decomposition/Wed, 14 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-19-lu-decomposition/Starting from middle-school bike problems and building up to Gaussian elimination, we crack open LU decomposition — because computing A⁻¹ is just painful.https://gdpark.blog/posts/microeconomics-19-substitution-effect-income-effect-inferior-goods-and-giffen/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-19-substitution-effect-income-effect-inferior-goods-and-giffen/We break down what actually happens when a price drops — splitting that bump in consumption into the substitution effect and the income effect, then going deep on inferior and Giffen goods.https://gdpark.blog/posts/financial-engineering-20-implicit-finite-difference-method-fdm-part-2/Sun, 18 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-20-implicit-finite-difference-method-fdm-part-2/We put our Ax=b solver to work and actually price a European call with Implicit FDM, walking through how the matrix equations generalize as we slice the grid into more pieces!https://gdpark.blog/posts/derivatives-20-the-greeks/Sat, 17 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-20-the-greeks/A casual walkthrough of why hedging exists and a few ‘dumb’ strategies before the real stuff — delta hedging — explained like chatting with someone in the field.https://gdpark.blog/posts/microeconomics-20-backward-bending-labor-supply-curve/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-20-backward-bending-labor-supply-curve/As wages rise you work more — until you don’t: here’s why the labor supply curve bends backward once you’d rather enjoy your money than grind 24/7.https://gdpark.blog/posts/financial-engineering-21-crank-nicolson-finite-difference-method-fdm/Sun, 18 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-21-crank-nicolson-finite-difference-method-fdm/Wrapping up the FDM trilogy with Crank-Nicolson — the most efficient of the three, averaging Explicit and Implicit to cut positional error in Black-Scholes approximations.https://gdpark.blog/posts/derivatives-21-the-greeks-practice-problems/Sat, 17 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-21-the-greeks-practice-problems/Working through Greeks practice problems — stop-loss strategies, futures option deltas, and hedging a short call position on silver futures.https://gdpark.blog/posts/microeconomics-21-compensating-variation-and-equivalent-variation/Sun, 17 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-21-compensating-variation-and-equivalent-variation/We dig into compensating and equivalent variation — two ways to pin down how much a price change is worth by pretending it was an income change instead.https://gdpark.blog/posts/financial-engineering-22-cholesky-decomposition-correlated-random-variables/Sun, 18 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-22-cholesky-decomposition-correlated-random-variables/A casual walkthrough of Cholesky decomposition — from real and Hermitian matrices to positive definite covariance matrices — and why it all matters in financial engineering.https://gdpark.blog/posts/microeconomics-22-market-demand-and-network-externalities/Sun, 17 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-22-market-demand-and-network-externalities/We stack up individual demand curves to get the market demand curve, watch it flatten under perfect competition, then kick off network externalities with real-life examples.https://gdpark.blog/posts/financial-engineering-23-estimating-pi-using-the-monte-carlo-method-in-python/Thu, 26 Sep 2019 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-23-estimating-pi-using-the-monte-carlo-method-in-python/Toss enough random darts at a unit square, count the ones inside the circle, and — boom — you’ve got π, courtesy of the Monte Carlo method and a bit of Python.https://gdpark.blog/posts/microeconomics-23-average-and-marginal-product-of-labor/Sun, 17 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-23-average-and-marginal-product-of-labor/We flip to the supplier side and dig into how output Q responds to labor L (with K fixed) — including why piling on more workers eventually starts hurting.https://gdpark.blog/posts/microeconomics-24-isoquants/Sun, 17 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-24-isoquants/We bring K back into the picture, plot the whole Q = f(L, K) surface in 3D, then slice it to see what isoquants actually are — infinite (L, K) combos that spit out the same output.https://gdpark.blog/posts/microeconomics-25-isoquants-the-uneconomic-region-of-production/Mon, 18 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-25-isoquants-the-uneconomic-region-of-production/That weird backward-bending chunk of the isoquant has a name — it’s the uneconomic region, and here’s exactly why it exists and why no sane firm would ever go there.https://gdpark.blog/posts/microeconomics-26-marginal-rate-of-technical-substitution/Mon, 18 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-26-marginal-rate-of-technical-substitution/We crack what the isoquant slope actually means — it’s the MRTS — and work out mathematically why that labor-for-capital swap rate keeps shrinking as you slide along the curve.https://gdpark.blog/posts/microeconomics-27-types-of-isoquants-linear-l-shaped-and-cobb-douglas/Mon, 18 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-27-types-of-isoquants-linear-l-shaped-and-cobb-douglas/A chill rundown of linear, L-shaped, and Cobb-Douglas isoquants — and why their shapes directly tell you everything about σ, the elasticity of substitution.https://gdpark.blog/posts/microeconomics-28-returns-to-scale/Mon, 18 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-28-returns-to-scale/We dig into the 3D production function to figure out why doubling a factory isn’t the same as building a new one — and how increasing, decreasing, and constant returns to scale all shake out.https://gdpark.blog/posts/microeconomics-29-technological-progress/Tue, 19 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-29-technological-progress/We sort technological progress on the K-L plane into three buckets — labor-saving, capital-saving, and neutral — by comparing MRTS slopes on isoquants over time.https://gdpark.blog/posts/microeconomics-30-opportunity-cost-vs-sunk-cost/Tue, 19 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-30-opportunity-cost-vs-sunk-cost/Breaking down opportunity cost and sunk cost with a hilariously relatable uni-picking analogy — because sometimes your ‘best’ choice becomes a sunk cost real fast.https://gdpark.blog/posts/microeconomics-31-cost-and-cost-minimization/Tue, 19 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-31-cost-and-cost-minimization/We dig into the cost minimization problem — and spoiler, it’s basically the same deal as utility maximization, just swap the budget line for an isocost line.https://gdpark.blog/posts/microeconomics-32-expansion-path/Tue, 19 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-32-expansion-path/Unlike demand theory, firms chasing a fixed output level have zero income effect — just pure substitution — and tracing those cost-minimizing combos as output rises draws out the expansion path.https://gdpark.blog/posts/microeconomics-33-labor-demand-curve/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-33-labor-demand-curve/We derive the labor demand curve by tracing how a firm’s optimal labor choice shifts each time the wage ticks up — first with graphs, then with a Cobb-Douglas proof.https://gdpark.blog/posts/microeconomics-34-short-run-analysis/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-34-short-run-analysis/In the short run capital is locked in at K̄, so cost minimization means working around that constraint — which shifts your expansion path and nudges total cost up.https://gdpark.blog/posts/microeconomics-35-cost-minimization-with-three-variables/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-35-cost-minimization-with-three-variables/Adding a third input M sounds fancy, but once you pin K as a fixed cost the whole 3D problem just collapses back into the same old 2D setup — same playbook, every time.https://gdpark.blog/posts/microeconomics-36-total-cost-marginal-cost-and-average-cost/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-36-total-cost-marginal-cost-and-average-cost/Wait, cost curves again?! Nope — this time we’re plotting minimum TC against Q, then eyeballing derivatives to build the marginal and average cost curves from scratch.https://gdpark.blog/posts/microeconomics-37-long-run-cost-minimization-with-cobb-douglas/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-37-long-run-cost-minimization-with-cobb-douglas/We pin down TC, MC, and AC for a Cobb-Douglas production function and find they all collapse to the same constant α — constant returns to scale is why.https://gdpark.blog/posts/microeconomics-38-economies-of-scale-and-diseconomies-of-scale/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-38-economies-of-scale-and-diseconomies-of-scale/We poke at what happens to TC when factor prices move, work through output elasticity of cost, and land on exactly what economies vs. diseconomies of scale actually mean.https://gdpark.blog/posts/microeconomics-39-short-run-total-average-and-marginal-cost-curves-stc-sac-smc/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-39-short-run-total-average-and-marginal-cost-curves-stc-sac-smc/We flip from long-run to short-run, lock K down as a constant, and split total cost into TFC + TVC to build the STC curve — which, unlike long-run TC, doesn’t pass through (0,0)!https://gdpark.blog/posts/microeconomics-40-graphing-ac-mc-sac-and-smc-together/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-40-graphing-ac-mc-sac-and-smc-together/We finally plot AC, MC, SAC, and SMC all on one graph and trace exactly how they intersect and relate as capital K gets pinned at different levels — it all snaps into place!https://gdpark.blog/posts/microeconomics-41-average-variable-cost-and-average-fixed-cost-avc-afc/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-41-average-variable-cost-and-average-fixed-cost-avc-afc/Breaking STC into FC + VC, then dividing by Q, shows SAC decomposes neatly into AFC + AVC — and why SMC passes through the minimum of AVC too.https://gdpark.blog/posts/microeconomics-42-perfectly-competitive-markets/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-42-perfectly-competitive-markets/A casual breakdown of perfectly competitive markets — why we bother studying a model that doesn’t exist, plus a walkthrough of its four core assumptions.https://gdpark.blog/posts/microeconomics-43-short-run-supply-curve/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-43-short-run-supply-curve/We derive the short-run supply curve in a perfectly competitive market — turns out it’s just the SMC curve above AVC, and here’s exactly why that matters.https://gdpark.blog/posts/microeconomics-44-short-run-supply-curve-part-2/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-44-short-run-supply-curve-part-2/We split fixed costs into sunk vs. non-sunk and trace out exactly when a firm decides to keep producing — or bail — in the short run.https://gdpark.blog/posts/microeconomics-45-chapter-2-3-practice-problems/Tue, 03 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-45-chapter-2-3-practice-problems/A collection of practice problems covering the material from Chapters 2 and 3, all laid out for you to work through.https://gdpark.blog/posts/microeconomics-46-chapter-4-practice-problems/Wed, 04 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-46-chapter-4-practice-problems/Work through the Chapter 4 practice problems to test your understanding and sharpen your skills.https://gdpark.blog/posts/microeconomics-47-chapter-5-practice-problems/Fri, 06 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-47-chapter-5-practice-problems/Grinding through Chapter 5 consumer theory problems — price-consumption curves, Giffen goods, and utility optimization — one painful step at a time.https://gdpark.blog/posts/microeconomics-48-chapter-6-practice-problems/Sat, 07 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-48-chapter-6-practice-problems/Working through Chapter 6 problems on production functions — filling tables, sketching graphs, and hunting down where average product, marginal product, and total product each hit their max.https://gdpark.blog/posts/microeconomics-49-chapter-7-practice-problems/Sun, 08 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-49-chapter-7-practice-problems/Working through Chapter 7 cost-minimization problems with gradients and isoquants — turns out it’s the exact same math as the utility-function stuff, just with different names.