Professionalism in Investment Management
Investment management is an upcoming profession. This is evidenced by the following: The public understanding of its practice and codes are still growing. There is a lack of recognition by the regulators and the employers, which prevent the establishment profession…
Ethics and Profession
A profession can be defined as the occupational group that is based on the unique education, specialist knowledge, and framework of practice and behavior that establishes community trust, respect, and recognition. A large proportion of professions outlines the importance of…
Hypothesis Test on Correlation
Intuitively, if the correlation coefficient between two variables is zero, then there is no linear relationship between the variables. Otherwise, if we use the test of significance to determine whether there is a linear relationship, we will be inclined to…
Value at Expiration and Profit for Call and Put Options
In an options contract, two parties transact simultaneously. The buyer of a call or a put option is the long position in the contract, while the seller of the option, also known as the writer of the option, is the…
ESG Considerations in Portfolio Planning and Construction
Environmental, social, and governance factors are collectively referred to by the acronym “ESG”. ESG integration is the practice of considering environmental, social, and governance factors in the investment process. The integration can be implemented across all asset classes, including equities,…
The Asset Management Industry
Buy-Side vs. Sell-side Asset managers are typically deemed to be on the buy-side. This ideally means that they buy the products of sell-side firms. Buy-side firms include asset managers, hedge funds, institutional investors, and retail investors. On the other hand,…
CFA Level 1 Study Notes – Economics
Study Session 4 Reading 8 – Topics in Demand and Supply Analysis LOS a: calculate and interpret price, income, and cross-price elasticities of demand and describe factors that affect each measure; -LOS b: compare substitution and income effects; -LOS c:…
Monte Carlo Simulation vs. Historical Simulation
Monte Carlo simulation and historical simulation are both methods that can be used to determine the riskiness of a financial project. However, each method uses different assumptions and techniques to develop the probability distribution of possible outcomes.
Monte Carlo Simulations
Monte Carlo simulations involve the creation of a computer-based model into which the variabilities and interrelationships between random variables are entered. A spread of results is obtained when the model is run many times – hundreds or thousands of times….
Continuous Compounding
Continuous compounding applies either when the frequency with which we calculate interest is infinitely large or the time interval is infinitely small. Put quite simply, under continuous compounding, time is viewed as continuous. This differs from discrete compounding where we…
