Mike Osborne
Honorary Senior Lecturer (Accounting and Finance)

Research

My research is based on a particular manifestation of a general principle: the principle is duality and the manifestation involves the polynomial. Given the fundamental theorem of algebra, a set of n numbers in the real domain may be entered as coefficients into a polynomial and the polynomial factorized to produce a unique set of n different numbers (roots) in the complex domain. This transformation allows problems couched in terms of real numbers to be recast in terms of their complex counterparts; thus, a real problem transforms into its complex dual. While solutions to real problems may be elusive, solutions to their duals may sometimes be found. Polynomials are ubiquitous in financial economics, and therefore duality may offer solutions to some financial problems; this possibility has driven my research for over thirty years.

More specifically, my research investigates the use and meaning of all solutions (interest rates) to the time value of money equation. The research attempts to understand interest rates that have been ignored by economists for centuries. The time value of money features in many areas of financial economics, and therefore the research has a variety of applications in economic theory, capital budgeting, retail & corporate finance, fixed income mathematics, and behavioural economics. More recently, duality applied to statistical theory has become an interest.

Some of the research is summarised in the book 'Multiple Interest Rate Analysis' published in January 2014 by Palgrave Macmillan: https://www.amazon.co.uk/Multiple-Interest-Rate-Analysis-Applications/dp/1349476277

'I liked everything about it (except for the title, which gave me no clue about what was inside). If anyone had asked me, I would have guessed that there was nothing very new to be said about present-value equations, but you have certainly showed that conjecture to be wrong. The product of the roots of the present-value polynomial contains interesting and useful information, as the book demonstrates'. Robert M. Solow, Nobel Laureate in Economics (1987), Institute Professor, Emeritus, and Professor of Economics, Emeritus, Massachusetts Institute of Technology.

'When facing complex problems that arise in the real world, one should always remember that real answers to real questions may require imagination. This book gets to the real root of such problems and more.' Peter Carr, PhD, Department Chair, Finance and Risk Engineering, Tandon School of Engineering, New York University.

'This is seminal stuff. The material in this book should have been discovered in the 1930s, 1940s, or 1950s. Instead, it managed to evade capture until very recently. I regret not having had access to this book in the 1980s, when I first worried about these and related issues as a graduate student. I thought at that time that no further resolution existed. So, this book was an eye opener for me. It is difficult to overemphasize the importance of Osborne’s work in finally putting into place that last missing piece of a jigsaw puzzle handed down from generations of previous financial economics researchers. Osborne carefully explains why multiple-interest-rate solutions to TVM equations are important, even those pesky large negative or complex-valued outcomes that other researchers are all too eager to discard.' Timothy Falcon Crack, PhD, Professor of Finance, University of Otago, New Zealand.

A computable document written in Mathematica is available in the Wolfram Demonstrations Project at http://demonstrations.wolfram.com/AModelIllustratingMultipleInterestRateAnalysisMIRA/. The document enables dynamic illustrations of many examples in the book.

A recent Tedx talk gives the flavour of the research via one of its many applications (retail finance):  http://www.youtube.com/watch?v=GfdQgxBbJvE.

Various research papers are in SSRN at http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=303089 and in REPEC at http://econpapers.repec.org/RAS/pos12.htm. PhD thesis is in the Middlesex University research repository at http://eprints.mdx.ac.uk/7288/.

Publications

Book

2014     Multiple Interest Rate Analysis: Theory and Applications, Palgrave Macmillan, ISBN 978-1-137-37276-5, https://link.springer.com/book/10.1057/9781137372772

Journal articles

2016     (with Ian Davidson) The Cambridge controversies in the theory of capital: contributions from the complex plane, The Review of Political Economy, 28(2),http://www.tandfonline.com/doifull/10.1080/09538259.2015.1129751 

2015     (with Edward O’Reilly) A Model Illustrating Multiple Interest Rate Analysis (MIRA), Wolfram Demonstrations Project. http://demonstrations.wolfram.com/AModelIllustratingMultipleInterestRateAnalysisMIRA/

2010     A resolution to the NPV-IRR debate? Quarterly Review of Economics and Finance, 50(2).https://www.sciencedirect.com/science/article/abs/pii/S1062976910000037

2005     On the computation of a formula for the duration of a bond that yields precise results, Quarterly Review of Economics and Finance, 45(1), http://www.sciencedirect.com/science/article/pii/S1062976904000869 

2003     (With Mark Osborne) A polynomial that is a statistical prism, Mathematical Gazette, 87(508)http://www.jstor.org/stable/3620567 

2001     Three extensions to the visualisation of financial concepts in the complex plane, Computers in Higher Education Economics Review, 14(2), http://www.economicsnetwork.ac.uk/cheer/ch14_2/contents.htm 

2000     Visualizing financial concepts in the complex plane, Computers in Higher Education Economics Review, 14(1), http://www.economicsnetwork.ac.uk/cheer/ch14_1/contents.htm 

1993     Chaos and the internal rate of return, Computers in Higher Education Economics Review, 7(19),http://www.economicsnetwork.ac.uk/cheer/cheer_archive.htm 

1990     Financial chaos, Management Accounting, 68(10)

1989     On Popper, education and training, Banking and Financial Training, 5(1)

1989     On the marginal cost of a student in the public sector of higher education in the UK, Journal of Further and Higher Education, 13(1) http://www.tandfonline.com/toc/cjfh20/13/1#.VAmHDUjTkxY 

1984     On the presentation of IS-LM analysis, The Indian Economic Journal, 32(1) 

1982     (With Brian Snowdon) Inflation and unemployment, Chap. 3, What sort of society? Elcock, G. (ed.), Martin Robertson, ISBN 0-85520-524-5

Working papers