1/28/2016
Fundamental versus Technical Analysis
2
Equities
Fundamental
RELATED CH AP TERS
15,16 & 17
Economic factors
Information
Technical
Price movements
Top-Down Analysis
Bottom-Up Analysis
3
Macro-economic analysis:
What are the current drivers in
3/10/2016
What do we know so far?
2
The CAPM and Index Models
1
Investors will formulate the optimal risky portfolio
Investors will use this optimal risky portfolio in combination with the
risk-free asset to find their own personally optimal portfolio
2/3/2016
The Investment Decision
2
Portfolio Theory (2)
Top-down process with 3 steps:
1
1.
Capital allocation between the risky portfolio and risk-free asset
2.
Asset allocation across broad asset classes
3.
Security selection of individual assets withi
2/9/2016
Road Map: We Solve 3 Problems
2
Portfolio Theory
1
Re l ate d c hapte r s
4, 5 & 6
1. What is the optimal portfolio of a risky asset and a risk-free
asset? (Capital Allocation)
2. What is the optimal portfolio of two risky assets which has the
mi
1/10/2016
Debt Security
2
Fixed Income Securities
A claim on a specified periodic stream of income
Fixed income securities
Payment formulas are specified in advance
R E L AT E D C H A P T E R S
12, 13 & 14
Minimum uncertainty about cash flows
Bond Cha
2/2/2016
Risk & Return (Expected Return)
2
Portfolio Theory
Observed realized rates of returns
1
Forecast future expected returns
Historical data
Rate of interest
Real
Supply
Demand
Government actions
Re l ate d c hapte r s
4, 5 & 6
Nominal
Expected in
1/3/2016
Motivation
Finance 412
Investment Principles
2
Why study investments?
Rich countries and poor countries
Trust the system
Developed stock market
Corruption
1
In s t ru ct o r: P a ri a n en ( P a ri ) Veeren
8 th
R eq u i red t ex t b o o k: In
3/28/2016
Objective
Market Efficiency & Behavioral
Finance
2
To discuss the efficient market hypothesis
To examine the empirical evidence supporting or not the notion
of market efficiency.
RELATED CHAPTERS
9, 10 & 11
Empirical Tests of Market Efficienc
Topic 1:
The foreign exchange market
What will we cover?
Nature of the market
Spot, forward, real, effective exchange rates
Cross rates
Triangular and covered interest arbitrage
Arbitrage and least cost dealing bounds on
cross and forward quotes
Bid and
Topic 5:
Exchange rate hedging
What will we study?
Why hedge?
How to hedge
Translation exposure
Transaction exposure
Operating exposure
Usually involves derivatives, sometimes financial or
real strategies
Problems and institutional details in using
der
Topic 3:
Exchange Rate Determination
and Forecasting
1
What will we cover?
[Quick tour] Balance of Payments preliminaries
BOP and floating exchange rates
Models of exchange rate determination
Apply to floating exchange rates, as do the next two
issues
Topic 9:
The international
monetary system
What will we study?
Exchange rates through history
Currency crises
The rise of new currencies
The new world currency order
2
Goals
Some of this material reads like a history lesson
I will cover the material qui
Topic 4:
Exchange Rate
Exposures
What will we study?
Three types of exchange rate exposures
Translation exposure
Transaction exposure
Operating exposure
How to measure exposures
2
What is XR exposure?
Changes in the value of assets/liabilities or ca
Topic 2:
International Parity Conditions
1
What will we cover?
Five international parity conditions
Their importance
2
The international parity conditions
Covered Interest Parity
Speculative Efficiency
Uncovered Interest Parity
Purchasing Power Parity
T
Topic 6:
International Portfolio
Choice
1
What will we study?
How does diversification work?
Does international diversification pay?
Why?
Examples
Do people diversify as suggested by theory?
Why or why not?
2
*Portfolio theory mathematics
Form a po
Topic 8:
International Financing
What will we study?
Some background
Instruments of choice
Debt vs equity issuance
Location choice
Currency choice
Types of equity and debt issues
2
Background: Why financing might
matter
Modigliani and Miller: Finan
Topic 7:
International Capital
Budgeting
What will we study?
Complications in international capital budgeting
The adjusted present value method
Discount rate issues
Country/political risk
Real options
2
International capital budgeting
overview
We will us
Topic 1:
The foreign exchange market
What will we cover?
Nature of the market
Spot, forward, real, effective exchange rates
Cross rates
Triangular and covered interest arbitrage
Arbitrage and least cost dealing
2
Functions of the FX markets
Transfer of c
FIN 414 Operation of Financial
Institutions
Handout 1: Introduction
Instructor: Ying Duan
Winter 2015
1
Outline
Role of financial institutions (FIs)
Overview of financial institutions
2
Function of Financial Institutions
3
Function of Financial Institut
FIN 301
Winter 2016
Name: _ Student ID Number: _
Exam Format
This is a 65-minute exam and it is composed of 25 multiple-choice questions. All multiple-choice questions
can be solved independently.
You have access to a scientific or financial calculator an
Homework #4: Project Valuation
Solutions
FIN 301, Winter 2016
Problem 1
Payback Period
The Payback Period is the number of years required for the cumulative cash flows to become equal to or greater than
zero.
Accumulated Undiscounted Cash Flow
Project B
P
University of Alberta School of Business
Department of Accounting, Operations and Information Systems
Accounting 322, Sample Midterm Exam
Last Name
First Name
I.D. Number
Section (indicate your assigned section by printing an X in the appropriate box):
B0
Homework #2: Bond Valuation
Solutions
FIN 301, Winter 2015
Problem 1
a) Coupon = 0.12 $1,000 / 2 = $60 and r = YTM/2 = 0.12/2 = 0.06. This is an example where coupon rate =
YTM. Thus, without calculation, bond price = face value of the bond = $1,000.
Alte
Homework #3: Equity Valuation
Solutions
FIN 301, Winter 2016
Problem 1
a) The dividend stream can be divided into a growing annuity (year 1 to year 5) and perpetuity (from year 6 on), with
!
! = $2.2, ! = ! = ! 1 +
Perpetuity value at year 5: ! =
!"!
!
$
School of Business
University of Alberta
Masa Watanabe
Winter 2015
INTERNATIONAL FINANCIAL MARKETS
FIN 442
INTERNATIONAL ASSET PRICING
It is the theory that decides what can be observed.
Albert Einstein
No, I dont understand my husbands theory of relativi
School of Business
University of Alberta
Masa Watanabe
Winter 2015
INTERNATIONAL FINANCIAL MARKETS
FIN 442
CURRENCY FUTURES AND FUTURES MARKETS
Currency Forward Contract . 3
Money Market Hedge . 5
Currency Futures Contract . 10
Comparison between Forwards
School of Business
University of Alberta
Masa Watanabe
Winter 2015
INTERNATIONAL FINANCIAL MARKETS
FIN 442
ADVANCED HEDGING STRATEGIES
Traditional Hedging Schemes. 3
Range Forward (Collar, Risk Reversal). 5
Participating Forward . 7
Range Forward (Importe
School of Business
University of Alberta
Masa Watanabe
Winter 2015
INTERNATIONAL FINANCIAL MARKETS
FIN 442
FOREIGN EXCHANGE RATES,
INTERNATIONAL PARITY CONDITIONS I
FX Market Characteristics . 4
The Domestic Fisher Equation . 10
The Law of One Price (LOP)