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Understanding Risk and Reward in Investing: Key Components and Actors, Lecture notes of Economics

University of Wales, Newport Economics

An overview of the concepts of risk and reward in investing, including the relationship between the two, different investment tools and vehicles, key quantitative concepts and measures, macro-economic concepts, and various actors involved. It also touches upon the importance of considering one's risk acceptance/aversion and time horizon, as well as the distinction between trading and taking a long-term position.

Typology: Lecture notes

2010/2011

Uploaded on 09/10/2011

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RISK AND REWARD

REWARD AND RISK GO TOGETHER

REWARD IS SIMPLE TO UNDERSTAND (% RETURN)

RISK IS LESS CLEAR, BUT FOR HISTORICAL ANALYSIS IS EQUATED

TO VOLATILITY – MUCH MORE SUBJECTIVE FOR FORWARD LOOKS

THINK OF YOUR OWN RISK ACCEPTANCE/AVERSION

CONSIDER YOUR TIME HORIZON

ARE INVESTING FOR YOURSELF, YOUR EMPLOYER, YOUR CLIENT?

FOR PERSONAL INVESTMENTS TAKE A LIFE-TIME VIEW

Partial preview of the text

Download Understanding Risk and Reward in Investing: Key Components and Actors and more Lecture notes Economics in PDF only on Docsity!

RISK AND REWARD

REWARD AND RISK GO TOGETHER

REWARD IS SIMPLE TO UNDERSTAND (% RETURN)

RISK IS LESS CLEAR, BUT FOR HISTORICAL ANALYSIS IS EQUATED

TO VOLATILITY – MUCH MORE SUBJECTIVE FOR FORWARD LOOKS

THINK OF YOUR OWN RISK ACCEPTANCE/AVERSION

CONSIDER YOUR TIME HORIZON

ARE INVESTING FOR YOURSELF, YOUR EMPLOYER, YOUR CLIENT?

FOR PERSONAL INVESTMENTS TAKE A LIFE-TIME VIEW

INVESTMENT TOOLS

(^) BANKS, MONEY MARKETS
(^) BONDS
(^) SHARES
(^) PROPERTY
(^) COMMODITIES
(^) ART
(^) DERIVATIVES (INCLUDING CDOs, OPTIONS)
(^) ARE YOU TRADING OR TAKING A LONG-TERM POSITION?

INVESTMENT INTERMEDIARIES

(^) BANKS
(^) PRIVATE BANKING
(^) BROKERS
(^) INSURANCE AGENTS
(^) FUND MANAGERS
(^) PERSONAL INVESTMENT ADVISERS

KEY QUANTITATIVE CONCEPTS

(^) RATE OF RETURN AND HOW TO CALCULATE IT
(^) DIVIDEND, COUPON, YIELD
(^) TAXATION, INCLUDING DOUBLE TAXATION AND

WITHHOLDING TAX

(^) INFLATION
(^) YIELD CURVES
(^) EXCHANGE RATES

MACRO-ECONOMIC CONCEPTS

(^) BALANCE OF TRADE
(^) CURRENT ACCOUNT (bad example is the current situation of the

USA current account, that little by little have become worse)

(^) CAPITAL ACCOUNT
(^) RESERVE AND TRADING CURRENCIES, RESERVES (Currently China is

handling a tremendous amount of US Dollars, could that be

possible to create an Asian reserve currency?)

(^) GOVERNMENT FINANCING
(^) ASSET INFLATION
(^) INCOME SUPPORTED SAVINGS

VARIOUS ACTORS

(^) MINISTRIES OF FINANCE/TREASURIES ((Independent from government, maintain inflation, issue currency, control interest rate, maintain employment)
(^) CENTRAL BANKS (Supervise banks)
(^) BANK SUPERVISION
(^) INVESTMENT BANKING (it exist also commercial banking, by funds, sale funds; Investment banking = help companies to issue shares, buy companies, leading investment bank is Goldman Sacks in America; HSBC in Europe, Douche bank, etc)
(^) INSURERS (ESPECIALLY CDS)
(^) MORTGAGE LENDERS
(^) SPECIAL INVESTMENT VEHICLES
(^) SOVEREIGN INVESTMENT FUNDS

Understanding Risk and Reward in Investing: Key Components and Actors, Lecture notes of Economics

Related documents

Partial preview of the text

Download Understanding Risk and Reward in Investing: Key Components and Actors and more Lecture notes Economics in PDF only on Docsity!

RISK AND REWARD

REWARD AND RISK GO TOGETHER

REWARD IS SIMPLE TO UNDERSTAND (% RETURN)

RISK IS LESS CLEAR, BUT FOR HISTORICAL ANALYSIS IS EQUATED

TO VOLATILITY – MUCH MORE SUBJECTIVE FOR FORWARD LOOKS

THINK OF YOUR OWN RISK ACCEPTANCE/AVERSION

CONSIDER YOUR TIME HORIZON

ARE INVESTING FOR YOURSELF, YOUR EMPLOYER, YOUR CLIENT?

FOR PERSONAL INVESTMENTS TAKE A LIFE-TIME VIEW

INVESTMENT TOOLS

WITHHOLDING TAX

USA current account, that little by little have become worse)

handling a tremendous amount of US Dollars, could that be

possible to create an Asian reserve currency?)

VARIOUS ACTORS