Agenda What is the course about?

Objectives Outcomes Administrative

Lecture 1.1: Course Objectives and Intended
Outcomes
Investment Analysis
Fall 2012
Anisha Ghosh
Tepper School of Business
Carnegie Mellon University
Oct 22, 2012
Agenda What is the course about? Objectives Outcomes Administrative
This Lecture
1
What is the course about?
2
Administrative issues.
3
Objectives of the course.
4
Intended outcomes.
Agenda What is the course about? Objectives Outcomes Administrative
This Lecture
1
What is the course about?
2
Administrative issues.
3
Objectives of the course.
4
Intended outcomes.
Agenda What is the course about? Objectives Outcomes Administrative
This Lecture
1
What is the course about?
2
Administrative issues.
3
Objectives of the course.
4
Intended outcomes.
Agenda What is the course about? Objectives Outcomes Administrative
This Lecture
1
What is the course about?
2
Administrative issues.
3
Objectives of the course.
4
Intended outcomes.
Agenda What is the course about? Objectives Outcomes Administrative
What is the course about?
Basic analytical tools used by different types of investment
professionals:
Portfolio managers
Traders
Individual investors
Applying the tools to various situations.
Agenda What is the course about? Objectives Outcomes Administrative
What is the course about?
Basic analytical tools used by different types of investment
professionals:
Portfolio managers
Traders
Individual investors
Applying the tools to various situations.
Agenda What is the course about? Objectives Outcomes Administrative
Objectives
Teach concepts and tools needed to analyze publicly
traded securities and apply them to real world situations.
What are the properties of securities that trade in the
market place?
How are the prices of these securities determined?
What are the relationships between the prices of different
securities?
How to make an optimal choice of a portfolio or strategy
involving these securities?
The course is not about stock picking but about portfolio
formation.
Agenda What is the course about? Objectives Outcomes Administrative
Objectives
Teach concepts and tools needed to analyze publicly
traded securities and apply them to real world situations.
What are the properties of securities that trade in the
market place?
How are the prices of these securities determined?
What are the relationships between the prices of different
securities?
How to make an optimal choice of a portfolio or strategy
involving these securities?
The course is not about stock picking but about portfolio
formation.
Agenda What is the course about? Objectives Outcomes Administrative
Objectives
Teach concepts and tools needed to analyze publicly
traded securities and apply them to real world situations.
What are the properties of securities that trade in the
market place?
How are the prices of these securities determined?
What are the relationships between the prices of different
securities?
How to make an optimal choice of a portfolio or strategy
involving these securities?
The course is not about stock picking but about portfolio
formation.
Agenda What is the course about? Objectives Outcomes Administrative
Objectives
Teach concepts and tools needed to analyze publicly
traded securities and apply them to real world situations.
What are the properties of securities that trade in the
market place?
How are the prices of these securities determined?
What are the relationships between the prices of different
securities?
How to make an optimal choice of a portfolio or strategy
involving these securities?
The course is not about stock picking but about portfolio
formation.
Agenda What is the course about? Objectives Outcomes Administrative
Objectives
Teach concepts and tools needed to analyze publicly
traded securities and apply them to real world situations.
What are the properties of securities that trade in the
market place?
How are the prices of these securities determined?
What are the relationships between the prices of different
securities?
How to make an optimal choice of a portfolio or strategy
involving these securities?
The course is not about stock picking but about portfolio
formation.
Agenda What is the course about? Objectives Outcomes Administrative
Objectives
Teach concepts and tools needed to analyze publicly
traded securities and apply them to real world situations.
What are the properties of securities that trade in the
market place?
How are the prices of these securities determined?
What are the relationships between the prices of different
securities?
How to make an optimal choice of a portfolio or strategy
involving these securities?
The course is not about stock picking but about portfolio
formation.
Agenda What is the course about? Objectives Outcomes Administrative
Objectives
Teach concepts and tools needed to analyze publicly
traded securities and apply them to real world situations.
What are the properties of securities that trade in the
market place?
How are the prices of these securities determined?
What are the relationships between the prices of different
securities?
How to make an optimal choice of a portfolio or strategy
involving these securities?
The course is not about stock picking but about portfolio
formation.
Agenda What is the course about? Objectives Outcomes Administrative
3 Basic Ideas
There are three basic ideas underlying most of the tools
and techniques that we will use:
1
No Arbitrage: There should be no arbitrage or "free lunch" in
well-functioning nancial markets. This idea allows us to gure out
the value and payoffs of many securities and trading strategies
2
Diversication and Hedging: Combining securities reduces the
volatility of the position. To do this effectively, we need some
measure of the sensitivity of securities to underlying uncertainty in
the economy.
3
Equilibrium Risk-Return Tradeoff: What risks are rewarded?
What risks are not rewarded and so should be diversied away?
This idea allows us to gure out appropriate benchmark portfolios
to evaluate particular strategies and managed portfolios.
Agenda What is the course about? Objectives Outcomes Administrative
3 Basic Ideas
There are three basic ideas underlying most of the tools
and techniques that we will use:
1
No Arbitrage: There should be no arbitrage or "free lunch" in
well-functioning nancial markets. This idea allows us to gure out
the value and payoffs of many securities and trading strategies
2
Diversication and Hedging: Combining securities reduces the
volatility of the position. To do this effectively, we need some
measure of the sensitivity of securities to underlying uncertainty in
the economy.
3
Equilibrium Risk-Return Tradeoff: What risks are rewarded?
What risks are not rewarded and so should be diversied away?
This idea allows us to gure out appropriate benchmark portfolios
to evaluate particular strategies and managed portfolios.
Agenda What is the course about? Objectives Outcomes Administrative
3 Basic Ideas
There are three basic ideas underlying most of the tools
and techniques that we will use:
1
No Arbitrage: There should be no arbitrage or "free lunch" in
well-functioning nancial markets. This idea allows us to gure out
the value and payoffs of many securities and trading strategies
2
Diversication and Hedging: Combining securities reduces the
volatility of the position. To do this effectively, we need some
measure of the sensitivity of securities to underlying uncertainty in
the economy.
3
Equilibrium Risk-Return Tradeoff: What risks are rewarded?
What risks are not rewarded and so should be diversied away?
This idea allows us to gure out appropriate benchmark portfolios
to evaluate particular strategies and managed portfolios.
Agenda What is the course about? Objectives Outcomes Administrative
3 Basic Ideas
There are three basic ideas underlying most of the tools
and techniques that we will use:
1
No Arbitrage: There should be no arbitrage or "free lunch" in
well-functioning nancial markets. This idea allows us to gure out
the value and payoffs of many securities and trading strategies
2
Diversication and Hedging: Combining securities reduces the
volatility of the position. To do this effectively, we need some
measure of the sensitivity of securities to underlying uncertainty in
the economy.
3
Equilibrium Risk-Return Tradeoff: What risks are rewarded?
What risks are not rewarded and so should be diversied away?
This idea allows us to gure out appropriate benchmark portfolios
to evaluate particular strategies and managed portfolios.
Agenda What is the course about? Objectives Outcomes Administrative
3 Basic Ideas
There are three basic ideas underlying most of the tools
and techniques that we will use:
1
No Arbitrage: There should be no arbitrage or "free lunch" in
well-functioning nancial markets. This idea allows us to gure out
the value and payoffs of many securities and trading strategies
2
Diversication and Hedging: Combining securities reduces the
volatility of the position. To do this effectively, we need some
measure of the sensitivity of securities to underlying uncertainty in
the economy.
3
Equilibrium Risk-Return Tradeoff: What risks are rewarded?
What risks are not rewarded and so should be diversied away?
This idea allows us to gure out appropriate benchmark portfolios
to evaluate particular strategies and managed portfolios.
Agenda What is the course about? Objectives Outcomes Administrative
Intended Outcomes
By the end of the course, you will be able to
1
Analyze the risk and reward characteristics of various risky
securities, including stocks, bonds, options, swaps, futures and
forward contracts.
2
Use portfolio optimization techniques to design and implement
efciently diversied strategies.
3
Use equilibrium models such as the CAPM to evaluate various
portfolios and portfolio managers
4
Calculate the term structure of interest rates and apply basic
xed-income risk measurement tools such as duration and
convexity.
5
Compute trading strategies involving options, futures, forwards
and various derivative securities and compute the price of options,
futures and various derivative securities.
Agenda What is the course about? Objectives Outcomes Administrative
Intended Outcomes
By the end of the course, you will be able to
1
Analyze the risk and reward characteristics of various risky
securities, including stocks, bonds, options, swaps, futures and
forward contracts.
2
Use portfolio optimization techniques to design and implement
efciently diversied strategies.
3
Use equilibrium models such as the CAPM to evaluate various
portfolios and portfolio managers
4
Calculate the term structure of interest rates and apply basic
xed-income risk measurement tools such as duration and
convexity.
5
Compute trading strategies involving options, futures, forwards
and various derivative securities and compute the price of options,
futures and various derivative securities.
Agenda What is the course about? Objectives Outcomes Administrative
Intended Outcomes
By the end of the course, you will be able to
1
Analyze the risk and reward characteristics of various risky
securities, including stocks, bonds, options, swaps, futures and
forward contracts.
2
Use portfolio optimization techniques to design and implement
efciently diversied strategies.
3
Use equilibrium models such as the CAPM to evaluate various
portfolios and portfolio managers
4
Calculate the term structure of interest rates and apply basic
xed-income risk measurement tools such as duration and
convexity.
5
Compute trading strategies involving options, futures, forwards
and various derivative securities and compute the price of options,
futures and various derivative securities.
Agenda What is the course about? Objectives Outcomes Administrative
Intended Outcomes
By the end of the course, you will be able to
1
Analyze the risk and reward characteristics of various risky
securities, including stocks, bonds, options, swaps, futures and
forward contracts.
2
Use portfolio optimization techniques to design and implement
efciently diversied strategies.
3
Use equilibrium models such as the CAPM to evaluate various
portfolios and portfolio managers
4
Calculate the term structure of interest rates and apply basic
xed-income risk measurement tools such as duration and
convexity.
5
Compute trading strategies involving options, futures, forwards
and various derivative securities and compute the price of options,
futures and various derivative securities.
Agenda What is the course about? Objectives Outcomes Administrative
Intended Outcomes
By the end of the course, you will be able to
1
Analyze the risk and reward characteristics of various risky
securities, including stocks, bonds, options, swaps, futures and
forward contracts.
2
Use portfolio optimization techniques to design and implement
efciently diversied strategies.
3
Use equilibrium models such as the CAPM to evaluate various
portfolios and portfolio managers
4
Calculate the term structure of interest rates and apply basic
xed-income risk measurement tools such as duration and
convexity.
5
Compute trading strategies involving options, futures, forwards
and various derivative securities and compute the price of options,
futures and various derivative securities.
Agenda What is the course about? Objectives Outcomes Administrative
Intended Outcomes
By the end of the course, you will be able to
1
Analyze the risk and reward characteristics of various risky
securities, including stocks, bonds, options, swaps, futures and
forward contracts.
2
Use portfolio optimization techniques to design and implement
efciently diversied strategies.
3
Use equilibrium models such as the CAPM to evaluate various
portfolios and portfolio managers
4
Calculate the term structure of interest rates and apply basic
xed-income risk measurement tools such as duration and
convexity.
5
Compute trading strategies involving options, futures, forwards
and various derivative securities and compute the price of options,
futures and various derivative securities.
Agenda What is the course about? Objectives Outcomes Administrative
Intended Outcomes
By the end of the course, you will be able to
1
Analyze the risk and reward characteristics of various risky
securities, including stocks, bonds, options, swaps, futures and
forward contracts.
2
Use portfolio optimization techniques to design and implement
efciently diversied strategies.
3
Use equilibrium models such as the CAPM to evaluate various
portfolios and portfolio managers
4
Calculate the term structure of interest rates and apply basic
xed-income risk measurement tools such as duration and
convexity.
5
Compute trading strategies involving options, futures, forwards
and various derivative securities and compute the price of options,
futures and various derivative securities.
Agenda What is the course about? Objectives Outcomes Administrative
Readings
Textbook: Modern Portfolio Theory and Investment
Analysis, 8th edition (by Edwin J. Elton, Martin J. Gruber,
Stephen J. Brown, William N. Goetzmann)
Lecture slides
Financial press: The Wall Street Journal, The Economist,
...
Agenda What is the course about? Objectives Outcomes Administrative
Readings
Textbook: Modern Portfolio Theory and Investment
Analysis, 8th edition (by Edwin J. Elton, Martin J. Gruber,
Stephen J. Brown, William N. Goetzmann)
Lecture slides
Financial press: The Wall Street Journal, The Economist,
...
Agenda What is the course about? Objectives Outcomes Administrative
Readings
Textbook: Modern Portfolio Theory and Investment
Analysis, 8th edition (by Edwin J. Elton, Martin J. Gruber,
Stephen J. Brown, William N. Goetzmann)
Lecture slides
Financial press: The Wall Street Journal, The Economist,
...
Agenda What is the course about? Objectives Outcomes Administrative
Evaluation
There will be a homework assignment every week.
Your grade on each assignment will count equally toward
your nal grade.
You will receive certication of course completion upon
securing a nal grade of at least 60%.