Economics 322
Winter 2017
Fin. Markets and Risk Management
Thorsten Koeppl
Assignment 1 Answer Key
Question 1:
(a) The margin requirement is 0.2 which means that the amount x that can be borrowed
for
Economics 322
Winter 2017
Fin. Markets and Risk Management
Thorsten Koeppl
Assignment 3
(Due: Wednesday, March 22 Dropbox until 3:00 pm)
1. Suppose the price of a common stock closes at $49 on March 1
Economics 322
Winter 2017
Fin. Markets and Risk Management
Thorsten Koeppl
Assignment 3 Answer Key
Question 1:
(a) The pricing formula for the stock price is given by
Dt+1 + Pt+1
1+k
Pt =
where k is t
Economics 322
Winter 2017
Topics in Macroeconomics
Thorsten Koeppl
Answer Key to Midterm
Question 1 - 2: A security yields a return of 6% with probability 1/4 and 2% with probability 3/4. Calculate th
Economics 322
Fall 2017
Fin. Markets and Risk Management
Thorsten Koeppl
Assignment 3 Answer Key
Question 1:
(a) The security market line (SML) is defined by the risk-free rate and the market portfoli
1.
(a)
P A=
C
C
$ 50
, y= =
=6.54
y
P A $ 764.29
Yield-to-maturity is 6.54%
5
0.05 1000
1000
+
=$ 936.05
t
(1+6.54 )5
t=1 (1+6.54 )
5
0.075 1000
1000
P C =
+
=$ 1039.85
t
(1+6.54 )5
t =1 (1+6.54 )
8
Economics 322
Fall 2017
Fin. Markets and Risk Management
Thorsten Koeppl
Assignment 4 Answer Key
Question 1:
(a) We first need to obtain the yield to maturity for the consol. The price of a consul is
Page 1 of 8 Pages
QUEENS UNIVERSITY
FACULTY OF ARTS AND SCIENCE
DEPARTMENT OF ECONOMICS
ECON 322
FINAL EXAMINATION
April 2016
Prof. Thorsten Koeppl
INSTRUCTIONS:
o This examination is THREE HOURS in l
Economics 322
Fall 2017
Fin. Markets and Risk Management
Thorsten Koeppl
Assignment 4
(Due: Tuesday, December 5 Dropbox until 3:00 pm)
1. Consider four different bonds all having the same yield-to-mat
Notes for Table on Slide 8 Set 11
Both bonds have a par value of B = 1000.
Since Bond 1 is a pure discount bond, we have that the spot rate is equal to the yield-tomaturity r1 = s1 = 1.05. Hence,
P1 =
Page 1 of 9 Pages
QUEENS UNIVERSITY
FACULTY OF ARTS AND SCIENCE
DEPARTMENT OF ECONOMICS
ECON 322
FINAL EXAMINATION
April 2017
Prof. Thorsten Koeppl
INSTRUCTIONS:
This examination is TWO HOURS in leng
Options II
ECON 322
Options Advanced Topics
Queens University
Fall 2017
Queens University ECON 322
1
Options II
Call Option: Time and Intrinsic Value
Queens University ECON 322
2
Options II
Pricing Op
Economics 322
Fall 2017
Fin. Markets and Risk Management
Thorsten Koeppl
Assignment 3
(Due: Wednesday, November 15 Dropbox until 3:00 pm)
1. Suppose there is a risk-free asset whose return is 4% and t
Mean-Var. Port. Theory I
ECON 322
Mean-Variance Portfolio Theory
(Part I)
Queens University
Fall 2017
Queens University ECON 322
1
Mean-Var. Port. Theory I
Returns
The return of a security is defined
Bond Management
ECON 322
Bond Portfolio Management
Queens University
Fall 2017
Queens University ECON 322
1
Bond Management
Relationship between Bond Prices and Yields
How do bond prices change when t
ECON 360 - LABOUR ECONOMICS
Fall 2016
Queens University
MIDTERM EXAM - ANSWERS
NAME:
ID#:
After you have completed the exam, sign the Honour Code statement below.
HONOUR CODE PLEDGE: I affirm that I h
1 Intro: Financial Securities and Market Infrastructure
Financial Markets
- A financial market is a market where people trade securities, commodities or even real assets
- Financial market infrastruct
8 The Efficient Market Hypothesis
The Hypothesis
- The current price of the security reflects all of available information about its economic value
If this is so, it is impossible for anyone to consi
1. Riskfreerate: Rf =4 =0.04
Marketportfolio,M,expectedreturn: R M =11 =0.11
Standarddeviationofmarketportfolio,M: M =20 =0.2
Equationforsecuritymarketline: Ri=R f + [ E ( R M )R f ] i , i=
2M
(a) Ri
Econ 322 Assignment 2
Question 1.
(a)
2
1 P
max E [ R P ]
2 T
E [ R ] ,
Subject to
E [ RP ] =0.5+ P0.5
P
P
2
P=( E [ R P ]0.5 ) +0.5
2
2
2
1 P
1
max E [ R P ]
=max E [ RP ]
E [ RP ]0.5 ) +0.5 )
(
9 Valuation of Common Stock
The Basic Idea
What is the correct way of valuing a stock?
Think of a tree that yield fruit
- To determine how much to pay, we need to figure out
1. How much fruit (earnin
6 The Capital Asset Pricing Model
Question
What does our portfolio selection problem tell us about the equilibrium return (price) of any security?
The equilibrium return is composed of (1) the risk-f
3 Mean-Variance Portfolio Theory (Part 2)
- Suppose we have N securities
- Their relevant characteristics are
Expected Return ! E[Ri ]
2
Variance ! i
Correlation ! ik
- We can use these securities
4 Selecting Optimal Portfolios
- So far, we have obtained the efficient frontier
HOW SHOULD AN INVESTOR CHOOSE THEIR OPTIMAL PORTFOLIO?
We assume mean-variance preferences
i.e. Investors only care ab
10 Bond Prices and Yields
Bonds
- The issuer of a bond promises a certain stream of payments against an initial amount borrowed over a
period of time
Typically, this involves a fixed, periodic paymen
2 Mean-Variance Portfolio Theory (Part 1)
Returns
- The gross return of the security is defined as the sum of the price change and any income received over
a period of time, divided by the price of th
7 Empirical Tests of CAPM
Question
- Can we actually use data to test whether the predictions of CAPM hold in financial markets?
Problem
CAPM works with ex-ante expectations
There are no data source
5 The Correlation Structure of Returns
Data Requirements for Portfolio Analysis
- We need to estimate expected returns E[Ri] on N securities
- We need to estimate a Variance-Covariance matrix for all