Authors
Citation
Pa. Horvath, COMPOUNDING DISCOUNTING IN CONTINUOUS-TIME, The Quarterly review of economics and finance, 35(3), 1995, pp. 315-325
Citations number
11
Categorie Soggetti
Business Finance",Economics
Journal title
ISSN journal
10629769
Volume
35
Issue
3
Year of publication
1995
Pages
315 - 325
Database
ISI
SICI code
1062-9769(1995)35:3<315:CDIC>2.0.ZU;2-S
Abstract
This paper suggests that the current method for compounding and discou
nting in continuous time may be inaccurate and misleading. The extant
continuous time model is based on an arithmetic average. Using the geo
metric mean, an alternative, simple, model is suggested. An example us
ing simulated data indicates that the potential error is meaningful in
terms of size and impact on statistical analyses.