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Formalization of Investment Process in Portfolio Game

Listed author(s):
  • Martin Jančar
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    Portfolio space (first time published at [1]) enables us to formalize economic activities in bookkeeping framework. In paper [2] author has defined production vector Y and new type of asset A2, that represent human work done during production of one new product. In paper [3] portfolio play was emiched about relative price of money interest rate and also unit labor cost was introduced. Some restriction on fraction demand / supply was introduced. Income constraint was main tool during the proof. In paper [4] some aspects of foreign trade were formalized. Relative price of money against other currency was defmed. In this paper author has defined some key vectors of investment decision process. The process is decomposed into parts: 1) of accumulating own resources, 2) of borrowing additional resources, 3) of investing into productive technology, 4) of production and payment of interest due, 5) repayment of principal. The flow/cost analysis was presented in simplified macro-form. In this paper author takes into accounts only 3 players because it is sufficient for this partial study. They are bank, customer (working for employers and buying its products) and investor (that both fmances project and produces goods). Seven assets are recognized. This time money, human work done, interest rates are simultaneously in the play. Effect of old and new product is described. They are both separately specified by type of asset. Analysis presented there is very close to that publishing at [2]. The financial resources needed for purchase of new technology (in this article technology is presented like investment) comes from two sources: own resources (for example this can be obtained from depreciation) and credit. In this study is for the first time simulated debt repayment with k installments. Process of paying back debt is so going through k+ 1 period. Chapter 3 highlights some phenomenon, important for investment decision. Also risk connected with investing is discussed. Competition with the old product and proper price setting is briefly discussed.

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    Article provided by The Czech Econometric Society in its journal Bulletin of the Czech Econometric Society.

    Volume (Year): 7 (2000)
    Issue (Month): 11 ()

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    Handle: RePEc:czx:journl:v:7:y:2000:i:11:id:87
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