Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
L6. Portfolio Evaluation
Kyounghun Bae
Read Lists: BKMJ Ch5, 24
Outline
Sharpe Ratio
Treynor Measure
Jensens Alpha Measure
Information Ratio
M 2 Measure
Value at Risk (VaR)
Expected Shortfall
Adjusting Returns for Risk
The simplest and most popula
Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
L7. Optimal Risky Portfolios
Kyounghun Bae
Read Lists: BKMJ Ch7
Outline
Utility functions and risk aversion
Simple asset allocation
risky and risk free asset
Risk and Risk Aversion
Definition: Gamble
A bet or wager on an uncertain outcome for enjoyme
Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
L5.b Risk and Return
Kyounghun Bae
Read Lists: BKMJ Ch5
Outline
Statistics Review
Expected returns
Variance, standard deviation
Covariance, correlation
History of Risk and Return
How do we calculate returns in the first place?
If you make an investm
Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
L3. Special Topics
Kyounghun Bae
Outline
The Financial Crisis of 2008
The Flash Crash of 2010
High Frequency Trading
Aside on the Financial Crisis: CDOs
Collateralized Debt Obligations (CDO)
Structured assetbacked security
Each CDO contained differ
Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
L1. The Investment Environment
Kyounghun Bae
Reading Lists: BKMJ Ch1
This lecture provides an overview of the investment environment. It mainly addresses
the role of financial markets, the dynamics among main participants, and the general
investment proce
Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
Homework 4
Read Lists: BKMJ Chapter 5
Q7. Suppose your expectations regarding the stock price are as follows:
Use Equations 5.11 and 5.12 to compute the mean and standard deviation of the HPR on
stocks.
Q9. What is the standard deviation of a random varia
Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
Homework 3
Read Lists: BKMJ Chapter 3 & Chapter 4
Chapter 3 Problem Sets
Q4. A market order has:
a. Price uncertainty but not execution uncertainty.
b. Both price uncertainty and execution uncertainty.
c. Execution uncertainty but not price uncertainty.
Q
Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
Homework 2
Read Lists: BKMJ Chapter 2
Q8. Suppose investors can earn a return of 2% per 6 months on a Treasury note with
6 months remaining until maturity. What price would you expect a 6month maturity
Treasury bill to sell for?
Q13. An investory is in a
Ulsan National Institute of Science and Technology
investment
FIN 50301

Fall 2016
Homework 1
Read Lists: BKMJ Chapter 1
Q7. Lanni Products is a startup computer software development firm. It currently owns
computer equipment worth $30,000 and has cash on hand of $20,000 contributed by
Lannis owners. For each of the following transacti