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The Risk and Time Value of Money

In: Hardwiring Sustainability into Financial Mathematics

Author

Listed:
  • Armen V. Papazian

    (University of Cambridge)

Abstract

This chapter discusses our current financial value paradigm and analytical framework built around risk and time parameters, serving one stakeholder, the mortal risk-averse return-maximising investor. Our current value framework in finance theory and practice is structured around two principles of value, risk and return, and time value of money. These principles discriminate against our evolutionary investments given their internal biases towards highly risky and very distant cash flows. Furthermore, the discussion identifies a missing analytical dimension in finance, i.e., space, our physical context, and reveals spaceless equations, often focused on future non-actual expected cash flows, while omitting the actual space impact it would take to achieve or expect them. Thus, sustainability in finance must surely address these omissions and make room for planet and humanity as equal stakeholders in the value and return equations that have shaped our markets and investments for the last many decades.

Suggested Citation

  • Armen V. Papazian, 2023. "The Risk and Time Value of Money," Springer Books, in: Hardwiring Sustainability into Financial Mathematics, chapter 0, pages 11-27, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-45689-3_2
    DOI: 10.1007/978-3-031-45689-3_2
    as

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    More about this item

    Keywords

    Sustainability; Financial mathematics; Money; Value; Risk; Time; Space; Impact;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G00 - Financial Economics - - General - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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