Papers Published in Journals

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Papers Published in Journals

Corporate Securities Innovation: An Update

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John D. Finnerty and Douglas R. Emery, Journal of Applied Finance, pp. 21-47. 2002 Spring/Summer

Comment: The Need to Enhance the Effectiveness of Discussants and Some Suggested Guidelines for Session Organizers and Discussants

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John D. Finnerty, Financial Practice and Education, pp. 15-18. 1993 Spring/Summer

College Tuition Prepayment Programs: Description, Investment Portfolio Composition, and Contract Pricing

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John D. Finnerty and Dean Leistikow, Journal of the Midwest Finance Association, pp. 165-174. 1992

Capital Budgeting and CAPM: Choosing the Market Risk Premium

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John D. Finnerty, Journal of Corporate Finance, pp. 11-14. 1988 Winter

Calculating Damages in Broker Raiding Cases

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John D. Finnerty, Michael J. McAllister, and Maureen M. Chakraborty, Stanford Journal of Law, Business & Finance, forthcoming.

Bank Discount, Coupon Equivalent, and Compound Yields: Comment

Glasgo, Landes, and Thompson (GLT) attempted in 1982 to demonstrate that formulas used to calculate the coupon equivalent yield of a short-term discounted note contain a theoretical inconsistency and a serious bias. They propose the use of a compound yield formula instead. Finnerty counters that the flaws lie not within the long-accepted formulas for calculating coupon equivalent yield, but within GLT's interpretation of those formulas. It is demonstrated, following GLT's notation, that GLT's recommended alternative is not clearly superior; it is simply designed to handle a different problem. GLT's formula is more appropriate for comparing the yields of 2 discounted notes of different maturities. The customary formulas are more appropriate for comparing the yields of a discounted note and a coupon-bearing instrument that mature the same day. Whichever formula is used, any yield comparison must be based on yields that have been calculated on a consistent basis.

John D. Finnerty, Financial Management, pp. 40-44. 1983 Summer

Arranging Financing for Biotechnology Ventures

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John D. Finnerty and Robert J. Kunze, Financier, pp. 20-34. 1994 May

Arbitrage-Free Spread: A Consistent Measure of Relative Value

Yield to maturity (YTM) has well-recognized limitations when interpreted as a measure of relative value among fixed-income securities with embedded options. Option-adjusted spread (OAS) is superior to YTM because it adjusts for the value of any embedded options. However, OAS is not as robust a measure of relative value as many fixed-income professionals apparently believe it to be. Moreover, different broker-dealers may use different computational procedures to arrive at an OAS. An alternative rich-cheap index, called the arbitrage-free spread (AFS), is shown to be a consistent measure of relative value. The arbitrage-free return (AFR) counterpart to AFS is also described. AFR and AFS can be applied to any fixed-income security or derivative thereof for which there is a specified debt service stream. In a reply, Hayre points out that, with the traditional method of discounting cash flows by today's zero-coupon curve, a spread added to the discount rates can be interpreted as a parallel shift of today's curve. With the OAS method of a large number of randomly generated discount rate paths that simulate future interest behavior, such an interpretation cannot be made.

John D. Finnerty and Michael Rose, Journal of Portfolio Management, pp. 65-77. 1991 Spring

An Overview of Derivatives Litigation, 1994 to 2000

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John D. Finnerty and Mark S. Brown, Fordham Journal of Corporate & Financial Law (vol.7), pp. 131-158. 2001

An Introduction to Credit Swaps

Often simply referred to as credit swaps, their purpose is to provide protection against deterioration in the credit quality or financial condition of a reference asset or entity. The reference asset or entity is usually a corporation, a government, or some other debt issuer or borrower to which the credit protection buyer has some credit exposure. In a credit swap the protection seller makes payment only if a specified credit event occurs. The protection buyer makes an upfront payment, or series of payments to the seller for the protection afforded by the credit swap. Credit swaps are broadly used for risk management and for investment purposes.

John D. Finnerty and Murray Grenville, Financier (vol. 9), pp. 51-63. 2002