Week 1

try the practice test

mondays 4:30 - 5:30

derivative security = whose values is derived from the value of other underlying financial assets.

stock = ownership

bond = borrowing (debt) - get paid before stock holders in an event of a problem

the divend youll get from now till tommorrow (dt+1)

R+1 is investement

Gross simple return is how much each pound of your investement is worth after one period

Net simple return is the percentage change …… (to do this subtract the ‘1’ from the gross simple return) optional x 100

log return - always natural log in this module (rt+1)

log return the natural log of the gross return

the log return is always smallaer than simple return and it is less accurate for larger returns

when dealing with multiple periods using log returns is easier

(1+R)(1+R) = (1+R)² if its 3 periods it would (1+R)³ basically (1+R)^n

When the arithemetic and geometric average are identical is is because the returns are the same each period - this is because you dont have to take compounding into account

log1 = 0

power rule, chain rule derivatives (for logs)

in this module when calculating real returns it is better to not use the approximate formula

True or false? Suppose you form a 50/50 portfolio of stock A and B. If the log return of stock A is 10% and the log return of stock B is 20%, the log return of the portfolio is 15% - Ans FALSE

log return not useful with multiple assets but with multiple assets

always convert to simple return first for portfolio returns

the most popular way to weight companies is to use value-weighted index

in price-weighed index = equal number of shares from each companies

The portfolio return is a weighted average of the individual stock returns, where the weights are the shares of wealth invested in each stock

Stock indices are portfolios thought to represent the general stock market.

things I need to work on potentially

rules of natural log

slide 19 L’Hopitals rule

limit for log ??

how she does the equations as well

the last equation bit of slide 20

how to do the weighting and number of shares calc from slides 27-29 in the sample question

from the practice test

correlation coefficeint

log without calculator

joint probability

variance co variance

variance and probability

Tomorrow try the seminar and see !!!!!!!

ask about slide 22 the price weighted bit 2 shares ??