On the nature of financial leverage

Yaroslav Ivanenko

Papers from arXiv.org

Abstract: The article presents a translation of some widespread financial terminology into the language of decision theory. For instance, financial leverage can be regarded as an object of choice or a decision. We show how the optics of decision theory allows perceiving the recently introduced metrics of see-through-leverage, which proved to be very useful in understanding the phenomenology of the recent economic crisis. The importance for practical decision making of specification of the statistical regularity of the random phenomena at hand as well as of the rationality class of the decision maker is discussed.

Date: 2010-09, Revised 2012-06
New Economics Papers: this item is included in nep-ban and nep-hpe
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1009.2896

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