Introduction to Discounted Cash Flow Analysis and Financial Functions in Excel

The financial and economic analysis of investment projects is typically carried out using the technique of discounted cash flow (DCF) analysis. This module introduces concepts of discounting and DCF analysis for the derivation of project performance criteria such as net present value (NPV), internal rate of return (IRR) and benefit to cost (B/C) ratios. These concepts and criteria are introduced with respect to a simple example, for which calculations using MicroSoft Excel are demonstrated.

Microscopic origin of non-Gaussian distributions of financial returns

In this paper we study the possible microscopic origin of heavy-tailed probability density distributions for the price variation of financial instruments. We extend the standard log-normal process to include another random component in the so-called stochastic volatility models. We study these models under an assumption, akin to the Born-Oppenheimer approximation, in which the volatility has already relaxed to its equilibrium distribution and acts as a background to the evolution of the price process. In this approximation, we show that all models of stochastic volatility should exhibit a scaling relation in the time lag of zero-drift modified log-returns. We verify that the Dow-Jones Industrial Average index indeed follows this scaling. We then focus on two popular stochastic volatility models, the Heston and Hull-White models. In particular, we show that in the Hull-White model the resulting probability distribution of log-returns in this approximation corresponds to the Tsallis (t-Student) distribution. The Tsallis parameters are given in terms of the microscopic stochastic volatility model. Finally, we show that the log-returns for 30 years Dow Jones index data is well fitted by a Tsallis distribution, obtaining the relevant parameters. (c) 2007 Elsevier B.V. All rights reserved.

Effects of reversible inactivation of the dorsal hippocampus on the behavioral and cardiovascular responses to an aversive conditioned context

In rats, conditioned fear to context causes freezing immobility and cardiovascular changes. The dorsal hippocampus (DH) has a critical role in several memory processes, including conditioning fear to contextual information. To explore a possible involvement of the DH in contextual fear conditioning-evoked cardiovascular (mean arterial pressure and heart rate increases) and behavioral (freezing) responses, DH synaptic transmission was temporarily inhibited by bilateral microinjections of 500 nl of the nonselective synapse blocker, cobalt chloride (COCl2, 1 mmol/l), at different periods of the experimental procedure. During re-exposure to the foot shock chamber in which conditioning had taken place, bilateral DH inhibition 10 min before the conditioning session had no effect on either behavioral or cardiovascular responses. Bilateral DH inhibition immediately after the conditioning session (110 min) decreased both behavioral and cardiovascular responses during the context test. Finally, 48 h after the conditioning session, bilateral DH inhibition 10 min before re-exposure to the foot shock chamber significantly reduced cardiovascular responses but not freezing responses. These results suggest that contextual fear conditioning acquisition does not depend on the DH. This structure, however, is crucial for the consolidation of contextual fear. Moreover, although the DH appears to be less important for the behavioral (freezing) changes induced by re-exposure to the aversive conditioned context, it may play an important role on the cardiovascular responses generated by this model.

Involvement of the lateral septal area in the expression of fear conditioning to context

Considering the evidence that the lateral septal area (LSA) modulates defensive responses, the aim of the present study is to verify if this structure is also involved in contextual fear conditioning responses. Neurotransmission in the LSA was reversibly inhibited by bilateral microinjections of cobalt chloride (CoCl(2), 1 mM) 10 min before or after conditioning or 10 min before re-exposure to the aversively conditioned chamber. Only those animals that received CoCl(2) before re-exposure showed a decrease in both cardiovascular and behavioral conditioned responses. These results suggest that the LSA participates in the expression, but not acquisition or consolidation, of contextual fear conditioning.