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Investment analysis and portfolio management ppt slides

investment analysis and portfolio management chapter 6 ppt and investment and portfolio management ppt
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MilburnClark,United Arab Emirates,Professional
Published Date:18-07-2017
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Investment Analysis & Portfolio Management Naveed Shahid, ASA, APSA Head of Investments Department EFU Life Assurance LtdCourse Description: • Portfolio management: Characteristics, markets and traditional asset. Classes (Govt. Bonds, Corporate Bonds, equities and money market) pay off structures of derivatives and options. Portfolio theories, CAPM, APT, Markowitz efficient frontiers (Modern Portfolio Theory) and Downser Risk, Risk of investments markets. • Pricing Techniques, continuous and discrete interest rate model solutions, option pricing, volatilities and correlation, behavior finance, limitations of various option, pricing techniques, execution time, impact of expenses & faxes, credit risk and other risks. • Asset Liability Management: nature of liabilities, including insurance company obligations (life, health and property/casualty) bank liabilities, pension & benefit funds. Funding objectives, risk/return dynamics, (regulatory environment, asset-liability management frame work. Course Review: • This course provides a thorough knowledge of portfolio management and its characteristics, markets and traditional asset classes (government bonds, corporate bonds, equities and money market), payoff structures of derivatives and options, portfolio theories, CAPM, AOT, Markowitz efficient frontiers (Modern Portfolio Theory) and Downser Risk, Risk of investment markets, Pricing techniques, continuous and discrete interest rate model solutions, option pricing, volatilities and correlation, behavioured finance, limitations of various option, pricing techniques, execution time, impact of expenses & taxes, credit risk and other risks, Asset-Liability management( insurance companies obligations, bank liabilities, pension & benefit funds, funding objectives, risk/return dynamics, regulatory environment, asset-liability management frame work). 'Would you tell me, please, which way I ought to go from here?‘ 'That depends a good deal on where you want to get to,' said the Cat. 'I don't much care where ' said Alice. 'Then it doesn't matter which way you go,' said the Cat. 'so long as I get somewhere,' Alice added as an explanation. Lewis Carroll, Alice's Adventures in Wonderland• Traditionally Investments is defined as the current commitment of resources in order to achieve later benefits • Broader viewpoint – based on the idea of flow of receipt and expenditure spanning a period of timeInvestment Science Application of scientific tools to investment BUT There is an art to investments knowing what to analyze and how to go about it Intuitive sideThe Investment Environment • Difference between Real Assets & Financial Assets • Need for Financial System • Clients of Financial System • Environment Response to Clients’ Demands • Market Structure • Ongoing TrendsReal Assets vs. Financial Assets • Real Assets • Productive Capacity of Economy (Land Buildings, Knowledge, Machines) • Financial Assets • Claims to Income produced by Real assets • Allow separation of Ownership & Management • Created and Destroyed in Ordinary course of businessNeed for Financial Systems • Allows individuals to control their consumption timings • Allow the Risk that is inherent in investments to be borne by investor willing to take risk • Allow easy separation of ownership and management (agency conflict)Clients of Financial System • Household sector • Financial Decision: How to invest Money • Interested in wide range of assets however small funds • Focus on after-tax income • Consumption timing • Diversification• Business Sector • Financial Decision how to raise money to finance a business • Either borrow money or sell ownership • Desire to get best prices• Government Sector • Need money to finance expenditure • Source taxation, borrowing • Borrow cheap since high credit worthiness • Regulate financial environmentEnvironment response to clients’ demands • Financial intermediation • Households want to invest, businesses want money • Financial intermediaries such as banks, and investment companies bring the two sectors together • Make profits from spread or fee • Advantages • Pool money from small investors and loan to large borrowers • Diversification • Expertise in borrowing money• Investment Banking • Design and Market Securities for the Business Sector since businesses do not directly tap the market • Important to keep good reputation • Financial Innovations and Derivatives • Response to Taxation and regulationMarket Structure • Direct search market • Least organized; buyers and sellers must find each other eg. Ad. In newspaper • Brokered market • Broker brings buyer and seller together for a fee eg. Real estate market • Dealer Markets • Make money from bid-ask spread • Buy and sell assets from their own inventory • Auction markets • Buyer and seller converge at one place • Only efficient if sufficient volume eg. Stock exchangeOngoing Trends • Globalization • Securitization • Credit Enhancements • Financial EngineeringMoney Market • Short Term sub-sector of Fixed Income Market • Many in large denomination but also exist for small investorsTreasury Bills • Most Liquid • Sold at discount (no coupons) • Bank discount yield = (F-P) / F (360 / n) • Problem with bank discount yield • Use 360 days rather than 365 days • Use simple interest • Denominator is par value rather than priceCertificates of Deposits • Time deposits with banks • Interest and principal paid on maturity • NegotiableCommercial Papers • Companies issue them directly • Maturities generally one to two months • Often backed by bank line of credit