Pricing Financial Forwards and Futures
After completing this reading, you should be able to: Define and describe financial assets. Define short-selling and calculate the net profit of a short sale of a dividend-paying stock. Describe the differences between forward and futures contracts and explain the…
Risk Management, Governance, Culture, and Risk taking in Banks
After completing this reading, you should be able to: Assess methods that banks can use to determine their optimal level of risk exposure, and explain how the optimal level of risk can differ across banks. Describe implications for a bank…
Risk Management Failures – What Are They and When Do They Happen?
After completing this reading, you should be able to: Explain how a large financial loss may not necessarily be evidence of a risk management failure. Analyze and identify instances of risk management failure. Explain how risk management failures can arise…
Applying the CAPM to Performance Measurement
After completing this reading, you should be able to: Calculate, compare, and evaluate the Treynor measure, the Sharpe measure, and Jensen’s alpha. Compute and interpret tracking error, the information ratio, and the Sortino ratio. Exam tip: Be sure to understand…
What is ERM?
After completing this reading, you should be able to: Describe enterprise risk management (ERM) and compare and contrast differing definitions of ERM. Compare the benefits and costs of ERM and describe the motivations for a firm to adopt an ERM…
Deciphering the Liquidity and Credit Crunch 2007-2008
After completing this reading, you should be able to: Describe the key factors that contributed to the lending boom housing frenzy. Explain the banking industry trends leading up to the financial crisis and assess the triggers for the liquidity crisis….
Hypothesis Tests and Confidence Intervals in Multiple Regression
After completing this reading you should be able to: Construct, apply, and interpret hypothesis tests and confidence intervals for a single coefficient in a multiple regression. Construct, apply, and interpret joint hypothesis tests and confidence intervals for multiple coefficients in…
Modeling Cycles: MA, AR, and ARMA Models
After completing this reading you should be able to: Describe the properties of the first-order moving average (MA(1)) process, and distinguish between autoregressive representation and moving average representation. Describe the properties of a general finite-order process of order \(q\) (MA(\(q\)))…
Multifactor Models of Risk-Adjusted Asset Returns
After completing this reading, you should be able to: Explain the arbitrage pricing theory (APT), describe its assumptions, and compare the APT to the CAPM. Describe the inputs (including factor betas) to a multifactor model and explain the challenges of using…
Modeling and Forecasting Seasonality
After completing this reading you should be able to: Describe the sources of seasonality and how to deal with it in time series analysis. Explain how to use regression analysis to model seasonality. Explain how to construct an h-step-ahead point…
