course outline to investment analysis-series 1

7/27/2019 Course Outline to Investment Analysis-Series 1

1/30

Agenda What is the course about? Objectives Outcomes Administrative

Lecture 1.1: Course Objectives and Intended

OutcomesInvestment Analysis

Fall 2012

Anisha Ghosh

Tepper School of Business

Carnegie Mellon University

Oct 22, 2012


2/30


This Lecture

1 What is the course about?

2 Administrative issues.

3 Objectives of the course.

4 Intended outcomes.


3/30


This Lecture






4/30


This Lecture






5/30


This Lecture





A d Wh i h b ? Obj i O Ad i i i


6/30


What is the course about?

Basic analytical tools used by different types of investment

professionals:Portfolio managersTradersIndividual investors

Applying the tools to various situations.

A d Wh t i th b t? Obj ti O t Ad i i t ti


7/30


What is the course about?

Basic analytical tools used by different types of investment

professionals:Portfolio managersTradersIndividual investors

Applying the tools to various situations.



8/30


Objectives

Teach concepts and tools needed to analyze publiclytraded 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 differentsecurities?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.



9/30


Objectives





formation.



10/30


Objectives





formation.



11/30


Objectives





formation.



12/30


Objectives





formation.



13/30

g j

Objectives





formation.



14/30

g j

Objectives





formation.



15/30

3 Basic Ideas

There are three basic ideas underlying most of the toolsand techniques that we will use:

1 No Arbitrage:There should be no arbitrage or "free lunch" in

well-functioning financial markets. This idea allows us to figure outthe value and payoffs of many securities and trading strategies2 Diversification 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 diversified away?

This idea allows us to figure out appropriate benchmark portfolios

to evaluate particular strategies and managed portfolios.



16/30

3 Basic Ideas






the economy.






17/30

3 Basic Ideas






the economy.






18/30

3 Basic Ideas






the economy.






19/30

3 Basic Ideas






the economy.






20/30

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

efficiently diversified strategies.3 Use equilibrium models such as the CAPM to evaluate various

portfolios and portfolio managers4 Calculate the term structure of interest rates and apply basic

fixed-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.



21/30

Intended Outcomes













22/30

Intended Outcomes













23/30

Intended Outcomes













24/30

Intended Outcomes













25/30

Intended Outcomes













26/30

Intended Outcomes













27/30

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,

...



28/30

Readings




Lecture slides


...



29/30

Readings




Lecture slides


...



30/30

Evaluation

There will be a homework assignment every week.

Your grade on each assignment will count equally towardyour final grade.

You will receive certification of course completion upon

securing a final grade of at least 60%.

course outline to investment analysis-series 1

Documents