Investments

What you'll learn

• Distinguish real and financial assets, describe the main asset classes, intermediaries and markets, and explain how price-weighted, value-weighted and equally weighted indices are built.
• Explain order types, trading costs, margin purchases and short sales, and compare 401(k)s, traditional and Roth IRAs and taxable accounts, including long-term capital gains rates, qualified dividends and the wash sale rule.
• Measure annualized, geometric, log, real, time-weighted and money-weighted returns, and describe risk with standard deviation, skewness, value at risk, expected shortfall and drawdown.
• Apply utility and risk aversion to the choice between a risky portfolio and the risk-free asset, and calculate the risk, minimum-variance weights and diversification benefit of two-asset portfolios.
• Construct the efficient frontier and the tangency portfolio for many assets, explain the separation property, use the single-index model, and recognize the limits of mean–variance optimization.
• Derive and apply the CAPM, distinguish the capital market line from the security market line, estimate beta and alpha by regression, and evaluate the empirical evidence on the model.
• Explain the arbitrage pricing theory and multifactor models such as Fama–French, test for apparent alpha with factor regressions, and evaluate market efficiency, anomalies and behavioral finance.
• Apply top-down analysis, the residual income model and justified multiples to value shares, assess earnings quality, and infer the growth or risk premium implied by market prices.
• Describe fixed-income securities, compute realized compound yields, bootstrap spot rates, derive forward rates, interpret the yield curve and calculate breakeven inflation.
• Calculate duration and convexity, estimate bond price changes, immunize a liability, and decompose credit spreads into expected loss and risk premiums.
• Value options with put–call parity, binomial trees and the Black–Scholes model, build basic option strategies, price futures by the cost of carry, and hedge a portfolio with index futures.
• Compare fund structures and fees, evaluate managers with the Sharpe, Treynor, Jensen, information-ratio and M² measures, explain SEC, FINRA and SIPC protection, and build a diversified, tax-aware portfolio for an invented investor.