Hirshleifer Model Formulas Finance
● C0 = CF0 − I0 + borrowed amount or − lended amount
● amount borrowed = C0 − CF0 − I0
● C1 = CF1 + OF−’repayment”
● I0 = EA = Initial investment, can be invested in real projects
● CF0 = OA − CF1/(1 + r)
● CF1 = OB − CF0 ∗ (1 + r)
● OG = C0 + C1/(1 + r)
● OG = OH/(1 + r)
● OG = OA + AG
● OG = Maximum consumption at t = 0
● OA = Present value of financial wealth
● OA = CF0 + CF1/(1 + r)
● OA = OG − AG
● AG (NPV) = PV investment − I0 = EG − EA
● AG (NPV) = −EA+OF/(1+r) Note: EA is negative, because it is an
investment
● OF = EG ∗ (1 + r)
● OF = payment investment
● C0 = CF0 − I0 + borrowed amount or − lended amount
● amount borrowed = C0 − CF0 − I0
● C1 = CF1 + OF−’repayment”
● I0 = EA = Initial investment, can be invested in real projects
● CF0 = OA − CF1/(1 + r)
● CF1 = OB − CF0 ∗ (1 + r)
● OG = C0 + C1/(1 + r)
● OG = OH/(1 + r)
● OG = OA + AG
● OG = Maximum consumption at t = 0
● OA = Present value of financial wealth
● OA = CF0 + CF1/(1 + r)
● OA = OG − AG
● AG (NPV) = PV investment − I0 = EG − EA
● AG (NPV) = −EA+OF/(1+r) Note: EA is negative, because it is an
investment
● OF = EG ∗ (1 + r)
● OF = payment investment
