Effects of Behavioral Factors on Adviser-Client Interactions
A successful client-adviser relationship is characterized by the planning, construction, and selection of the most optimal portfolio for the client. This involves staying the course, bolstered by solid communication between both parties. The first logical step is to have the…
Influence of Behavioral Factors on Portfolio Construction
Various biases affect portfolio construction in different ways. The following are some of the more common and testable biases, along with the consequences they bring for clients who do not mediate them: Status quo bias: This is the tendency toward…
Uses and Limitations of Classifying Investors into Personality Types
Advisers are encouraged to include behavioral factors in their clients’ portfolios. This tends to improve adviser-client relationships. In addition, the inclusion of behavioral factors in clients’ portfolios yields portfolios that are closer to the efficient frontier. The following models help…
Climate-Related Financial Risks – Measurement Methodologies
After completing this reading, you should be able to: Describe the main issues in identifying and measuring climate-related financial risks. Identify unique data needs inherent in the climate-related risks and describe candidate methodologies that could be used to analyze these…
Inflation: a Look under the Hood
After completing this reading, you should be able to: Describe how inflation dynamics differ between a low-inflation regime and a high-inflation regime. Explain the process of wage and price formation, the role inflation plays in this process, and vice versa….
Artificial Intelligence Risk & Governance
After completing this reading, you should be able to: Identify and discuss the categories of potential risks associated with the use of AI by financial firms and describe the risks that are considered under each category. Describe the four core…
Cognitive Errors Vs. Emotional Biases
Distinguishing between cognitive and emotional bias is not always a binary process. Some biases manifest elements of both cognitive and emotional aspects. Categorizing biases as cognitive or emotional is useful to analysts and advisors in answering the question of…
The Future Monetary System
After completing this reading, you should be able to: Identify and describe the benefits and limitations of crypto and decentralized finance (DeFi) innovations. Describe the role of stablecoins in DeFi ecosystems and differentiate among the types of stablecoins. Discuss possible…
Case Study: Model Risk and Model Validation
After completing this reading, you should be able to: Define a model and describe different ways financial institutions can become exposed to model risk. Describe the role of the model risk management function and explain best practices in the model…
Case Study: Third-party Risk Management
After completing this reading, you should be able to: Explain how risks related to the use of third parties can arise and describe characteristics of an effective third-party risk management framework. Describe the lessons learned from the case study involving…
