Measures of Financial Risk
After completing this reading, you should be able to: Describe the mean-variance framework and an efficient frontier. Compare the normal distribution with the typical distribution of returns of risky financial assets such as equities. Define the VaR measure of risk,…
Option Sensitivity Measures: The “Greeks”
After completing this reading you should be able to: Describe and assess the risks associated with naked and covered option positions. Describe the use of a stop-loss hedging strategy, including its advantages and disadvantages, and explain how this strategy can…
Applying Duration, Convexity, and DV01
p> After completing this reading, you should be able to: Describe a one-factor interest rate model and identify common examples of interest rate factors. Define and compute the DV01 of a fixed-income security given a change in rates and the…
Interest Rates
After completing this reading, you should be able to: Calculate and interpret the impact of different compounding frequencies on a bond’s value. Define spot rate and compute spot rates given discount factors. Interpret the forward rate and compute forward rates…
Bond Yields and Return Calculations
After completing this reading, you should be able to: Distinguish between gross, and net realized returns and calculate the realized return for a bond over a holding period, including reinvestments. Define and interpret the spread of a bond and explain…
Machine Learning and Prediction
After completing this reading, you should be able to: Explain the role of linear regression and logistic regression in prediction. Evaluate the predictive performance of logistic regression models. Understand how to encode categorical variables. Discuss why regularization is useful, and…
Machine Learning Methods
After completing this reading, you should be able to: Discuss the philosophical and practical differences between machine learning techniques and classical econometrics. Compare and apply the two methods utilized for rescaling variables in data preparation. Explain the differences among the…
Mortgages and Mortgage-Backed Securities
After completing this reading, you should be able to: Describe the various types of residential mortgage products. Calculate fixed-rate mortgage payment and its principal and interest components. Describe the mortgage prepayment option and the factors that influence prepayments. Summarize the…
Corporate Bonds
After completing this reading, you should be able to: Understand what a bond is and describe the methods of issuing bonds. Describe the features of bond trading and explain the behavior of bond yield. Describe a bond indenture and explain…
Foreign Exchange Markets
After completing this reading, you should be able to: Explain and describe the mechanics of spot quotes, forward quotes, and future quotes in the foreign exchange market and distinguish between the bid and ask exchange rates. Calculate bid-ask spread and…
