Generalized financial ratios

descriptionPublicationkeyboard_double_arrow_right Article 29 Jan 2007 English Publisher:WileyJournal:Mathematical Methods in the Applied Sciences, volume 30, pages 995-1,001 (issn: 0170-4214, eissn: 1099-1476,

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Authors: Nadarajah, Saralees; Kotz, Samuel;

doi: 10.1002/mma.831

Generalized financial ratios

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Abstract

AbstractRatios of random variables are prevalent in finance. Examples include: current ratio, sales margin, changes in capital employed, interest cover, liabilities ratio and financial leverage ratio. In this note, we derive the exact distribution of the ratio X/(X + Y) when X and Y are independent generalized Pareto random variables, Pareto distribution being the first and the most popular distribution used in finance. Copyright © 2007 John Wiley & Sons, Ltd.

Related Organizations

University of Manchester
United Kingdom
University of Manchester
United Kingdom
George Washington University
United States

Keywords

generalized Pareto distribution, Statistical methods; economic indices and measures, Finance etc., financial ratios, ratios of random variables

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