Unbounded rationality is a theoretical concept that suggests that individuals and organizations have no cognitive or resource limitations in their ability to make fully rational decisions. In other words, it assumes that…
Category: Behavioral finance
What is Bounded rationality?
Bounded rationality is a concept in economics and psychology that suggests that individuals and organizations have limitations in their ability to make fully rational decisions. Instead, individuals and organizations operate within cognitive…
Status Quo Bias in the Finance
Status quo bias is a tendency to prefer the current state of affairs and resist change. In finance, status quo bias can manifest in various ways, such as: In general, status quo…
What Is the Black-Scholes Model?
The Black-Scholes model, also known as the Black-Scholes-Merton model, is a mathematical model used to price options contracts, including both call and put options. It was developed by Fischer Black and Myron…
What Was Long-Term Capital Management (LTCM)?
Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by a group of highly successful investors, including Nobel Prize-winning economists Myron Scholes and Robert Merton. The fund’s primary strategy was…