PUZZLES OF FINANCE Six Practical Problems and Their Remarkable Solutions

". . . shining clarity and enviable originality" --Peter L. Bernstein, author of Against the Gods

"Mark Kritzman presents the reader with an entertaining way of learning some serious finance." --Harry Markowitz, Nobel Prize Recipient, 1990, Economic Sciences President, Harry Markowitz Company

Six challenging questions . . . six entertaining solutions, profound yet straightforward, and relevant to the everyday challenge of investing and investment management.

Puzzles of Finance takes on today's most persistently challenging financial questions and, through clever examples and just plain logic, helps you move beyond those questions to arrive at a deeper understanding of finance and the daily management of money. From Siegel's Paradox ("Is it possible to profit from asymmetry of exchange rate changes?") to questions of option value ("Why is the value of an option unaffected by the underlying asset's expected return?"), Puzzles of Finance goes beyond vague theoretical suppositions to supply practical, concrete solutions that investors and money managers can benefit from every day.

While the intellectually curious will be drawn to Puzzles of Finance, it is the day-to-day finance professional who will derive the most benefit from this remarkable book. In clear, concise language-with more than a touch of humor-renowned author and financial professional Mark Kritzman simplifies six of today's most perplexing financial riddles. Along the way, he presents a finance primer as practical as it is profound, as illuminating as it is entertaining. Kritzman artfully explores the relationship of such seemingly disparate fields as botany and thermodynamics to options. These proofs propel Puzzles of Finance forward with the pace of a novel. An easy-to-understand primer on financial concepts and quantitative methods combined with a technical glossary ensures that no concept is misunderstood.

The result is an unprecedented book that will change the way you view finance and investing. When you invest your time in reading Puzzles of Finance, you will uncover some of the most probing and insightful lessons in financial literature today.

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Critical Praise for Puzzles of Finance

". . . an extraordinary combination of the elements of finance, commonsense wisdom, sparkling humor, shining clarity, and enviable originality. This is a potent blend by any standard of measurement. Long time Kritzman watchers, however, would anticipate nothing less." --Peter L. Bernstein, Author, Against the Gods

"A modest, lively, clever, little book. Kritzman's puzzles range from party tidbits to the profound, and each is presented with a bit of history, a lot of insight, and just the right measure of wit. While he may not have intended it to be more than a collection of interesting conundrums, Kritzman has actually created a wonderful introduction to finance for the uninitiated with challenges for even the most sophisticated." --Stephen A. Ross, Franco Modigliani Professor of Finance and Economics, Sloan School, MIT; Co-Chairman, Roll and Ross Asset Management Corp.

"Some people do crosswords. Mark Kritzman does financial puzzles and his explications amuse and instruct. Financial theory has never been this much fun."-Jack R. Meyer, President, Harvard Management Company
"Puzzles of Finance should be a joy to finance mavens and even their friends! Perhaps all students of the field should be required to solve these six puzzles; they go to the heart of the intuitions for essential contributions, such as the pricing of options, the meaning of efficient diversification, and the definition of risk." --Kenneth A. Froot, Andre R. Jakurski Professor of Business Administration and Director of Research, Harvard Business School

MARK P. KRITZMAN is Managing Partner of Windham Capital Management Boston and a Senior Partner of State Street Associates. He is also the Research Director of the AIMR Research Foundation and serves on the boards of the Institute for Quantitative Research in Finance and the International Securities Exchange, and on the editorial boards of the Financial Analysts Journal, the Journal of Alternative Investments, and the Journal of Derivatives. Mr. Kritzman has written numerous articles for academic and professional journals and is the author of six books including The Portable Financial Analyst.