Review of continuously compounded capitalization: the opportunity cost implied by its non-application in financial markets

Abstract

In this communication we consider why certain financial assets that are priced in continuous time, such as corporate bonds or treasury bonds, are commonly valued in compound capitalization and not in continuously compound capitalization. Failure to apply the continuously compounded capitalization system implies a significant loss in opportunity cost, measured in terms of yield, which can influence the decision-making of financial agents.