THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301CDE - DERIVATIVES First Semester, 2009-2010
Tutorial 0 Problem Set Overview / Revision
Note: This tutorial covers fundamental finance concepts for your own revision and will not be disc
FINA2802 ABC Investments and Portfolio Analysis
Tutorial 2
1. Who sets the bid and asked price for a stock traded over the counter? Would you
expect the spread to be higher on actively or inactively traded stocks?
The dealer sets the bid and asked price.
THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301 - DERIVATIVES Second Semester, 2008-2009
Tutorial 4 Problem Set Chapter 5,6 & 7
Chapter 5 & 6
Question 1 (Annualized Forward Premium)
Suppose the stock price is $35 and the continuousl
THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301CDE - DERIVATIVES First Semester, 2009-2010
Tutorial 2 Problem Set Chapter 3
Practice Questions
Question 1 (Bull and Bear Spread)
Suppose that put options on a stock with strike prices
THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301CDE - DERIVATIVES First Semester, 2009-2010
Tutorial 1 Problem Set Chapter 1 & 2
General Information Tutor: Mr.
Clive Man Chung HO Office: Room 1108, KKL Building
Mailbox (To drop your
THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301CDE - DERIVATIVES First Semester, 2009-2010
Tutorial 3 Problem Set Chapter 3 & 4
Chapter 3
Question 1* (Tutorial 2 Question 5: Zero-cost collar)
Suppose you invest in the S&R index for
Basic Knowledge in Financial
Market
Jinghan Meng
Roadmap for Today
1.
2.
Chapter 3: How Securities are Traded
Chapter 4: Investment Companies
2
Chapter 3: How Securities are Traded
How Firms Issue Securities
Primary Market:
Firms issue new securities thro
Dividend Discount Model
Jinghan Meng
Roadmap for Today
1.
Chapter 18.3: Dividend Discount Model (DDM)
2
Dividend Discount Model
How can we determine the intrinsic value of a stock?
Review: CAPM and APT
CAPM is the equilibrium model that specifies risk-re
Arbitrage Pricing Theory
Jinghan Meng
Roadmap for Today
1.
2.
3.
Chapter 10.1: Multifactor Model
Chapter 10.2 - 10.4: Arbitrage Pricing Theory
Chapter 10.5: Identifying Factors and Empirical Tests
2
Review: Capital Asset Pricing Model
of
CAPM is the equi
Assignment#1
Due time: 11:50pm on Oct. 4th, 2015.
Please submit your typed assignment via Moodle link.
Please state your name, subclass number, and UID clearly.
2 points each
1. _ is not a money market instrument.
A. Certificate of deposit
B. Brokers call
Assignment#1
Due time: 11:50pm on Oct. 4th, 2015.
Please submit your typed assignment via Moodle link.
Please state your name, subclass number, and UID clearly.
2 points each
1. _ is not a money market instrument.
A. Certificate of deposit
B. Brokers call
1
Why study investments?
Be a smart investor!
Equity
Analysis
Debt
Securities
Option
derivatives
Portfolio
Theory
2
An investment is the commitment of current
money or other resources in the expectation
of reaping future benefits.
3
If you have HK$50,000
FINA2802 ABC Investments and Portfolio Analysis
Tutorial 3
1. What are some comparative advantages of investing in the following:
a. Unit investment trusts.
b. Open-end mutual funds.
c. Individual stocks and bonds that you choose for yourself.
a.
Unit inv
1
Security markets
Primary market
Secondary market
How securities are traded
Type of orders
Trading systems
Buy on margin, short sale
Regulations for securities trading
2
Primary Market
Firms issue new securities through underwriter to
the public
I
Capital Asset Pricing Model
Jinghan Meng
Review: Markowitz Portfolio Theory
Portfolio theory is a theory of finance that attempts to:
maximize portfolio expected return for a given amount of portfolio risk;
or equivalently minimize risk for a given level
Portfolio Theory III
Jinghan Meng
Review: Portfolios of One Risky Asset and
a Risk-Free Asset
Asset
Weight
Risky assets (P)
Risk-free Asset (F)
Complete Portfolio (C)
1y
=1
Expected
Return
SD of
Return
rP
E(rP )
P
rf
y
Return
rf
0
rC
E(rC )
C
Complete por
FINA2320/2802DE Fall 2015: Group Project
Due: 5pm Monday, November 30
This project aims to empirically analyze returns of individual stocks using different
models that we have learned in this course.
Stocks:
In this project, we study the stocks of the fol
Types of Orders
Market Order:
Executed immediately
Trader receives current market price
A large order may be filled at
multiple prices
Price-contingent Order:
Traders specify buying or selling
price
Limit orders vs. stop orders
Limit-buy: max price to buy
Portfolio Theory I
Jinghan Meng
Roadmap for Today
1.
2.
3.
Chapter 5.1-5.3: Interest Rates and Inflation
Chapter 5.4: Risk and Returns Scenario Analysis
Chapter 5.5-5.8: Risk and Returns Time Series Analysis
2
Interest Rates and Inflation
Interest Rates
I
Portfolio Theory II
Jinghan Meng
Roadmap for Today
1.
2.
Chapter 6.1: Risk Aversion and Utility Function
Chapter 6.2-6.6: Capital Allocation One Risky Asset, A Riskfree Asset
2
Risk Aversion and Utility Function
Risk Aversion
Investors are willing to cons
FINA2320/2802DE Fall 2015: Homework #1
Due: 5pm Tuesday, 20 October
(50 points in total)
1. (15 points) Suppose that Facebook is selling at $75 per share.
You are bullish on Facebook stock, and want to buy 1000 shares on margin. The initial
margin is 50%.
THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301CDE - DERIVATIVES First Semester, 2009-2010
Tutorial 0 Problem Set Solution Overview / Revision
Practice Questions
Question 1 (a)
With annual compounding, the return is:
1100 1 = 0.1 10
THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301CDE - DERIVATIVES First Semester, 2009-2010
Tutorial 3 Slide Chapter 4 Introduction to Risk Management
Basic Risk Management What is Risk Management?
A firm that actively uses derivativ
THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301CDE - DERIVATIVES First Semester, 2009-2010
Tutorial 5 Problem Set Chapter 7
Question 1* (Tutorial 4 Question 7: Forward Rate Agreement)
Suppose that in order to hedge interest rate ris
THE UNIVERSITY OF HONG KONG FACULTY OF BUSINESS AND ECONOMICS FINA0301 - DERIVATIVES Second Semester, 2008-2009
Tutorial 4 Slide Chapter 5 & 6 Financial Forwards and Futures Chapter 7 Interest Rate Forwards and Futures
Chapter 5 & 6
Proof of Forward Prici