The uncertainty inherent in investing is demonstrated by the historical distributions of returns in three major asset classes: cash, bonds, and stocks. Fundamental to the understanding of risk are the concepts of vulnerabilities, assets, and threats. Our new CrystalGraphics Chart and Diagram Slides for PowerPoint is a collection of over 1000 impressively designed data-driven chart and editable diagram s guaranteed to impress any audience. In addition, because most bonds are not riskless, the discount rate will embody an additional premium that reflects bond-specific characteristics such as default risks, liquidity, call risk and so on. Sensitivity of a stocks return to the return on, Turbo Charged Seafood has the following returns, When the market was up 1, Turbo average change, When the market was down 1, Turbo average, The average change of 1.6 (-0.8 to 0.8) divided, Diversification reduces unique risk, but not, The beta of a portfolio will be an weighted. Research has shown that the two are linked in the capital markets and that generally, higher returns can only be achieved by taking on greater risk. This includes both decisions by individuals (and financial institutions) to invest in financial assets, such as common stocks, bonds, and other securities, and decisions by a firm’s managers to invest in physical assets, such as … Low to Moderate Risk. Positive risk-return relationship: the higher the risk, the higher the average return . Let W be the total money invested in a portfolio, You invest 400 of your 1000 in IBM at a price, What is the portfolio weight for IBM and Dell, The return of a portfolio is the weighted average, The expected return of a portfolio is the, John puts his money half in stock A and half in, What is the mean and variance of the return of, The mean of the return of a portfolio is the, The variance of the return of the portfolio is. (ITA), MIAFA, Examiner for P1 Managerial Finance. - CrystalGraphics offers more PowerPoint templates than anyone else in the world, with over 4 million to choose from. - Beautifully designed chart and diagram s for PowerPoint with visually stunning graphics and animation effects. In investing, risk and return are highly correlated. Vanguard refers to these types of assets as short-term reserves. The concept of financial risk and return is an important aspect of a financial manager's core responsibilities within a business. It does this in several ways. Six levels of risk for mutual fund schemes: i. Expected return is the average return the asset has generated based on historical data of actual returns. Suppose you have a portfolio of IBM and Dell with, The difference between the expected return, Example, the expected return on IBM is 10, the, If a security ( an individual security or a, The risk premium on each security is proportional, The graphic representation of CAPM in the. Return CapitalYield Gain 3. ADVERTISEMENTS: So far our analysis of risk-return was confined to single assets held in isolation. After you enable Flash, refresh this page and the presentation should play. Try our expert-verified textbook solutions with step-by-step explanations. investments in shares and bonds for adding values to an. INTRODUCTION TO SECURITIES TRADING AND MARKETS Author: John Last modified by: Reed Elsevier Created Date: 7/28/2012 11:40:52 AM Document presentation format, | PowerPoint PPT presentation | free to view, Incremental Risk Charge (IRC) Introduction, - The incremental risk charge (IRC) is a regulatory requirement from the Basel Committee in response to the financial crisis. Discuss the different types of investor attitudes toward risk. ... - Introduction to Petrozuarta Case Situation in Venezuela Alternatives for PdVSA Is the Investment Alternative Unique How does the Investment Alternative Compare to ... - UTILITY AND RISK AVERSION (Asset Pricing and Portfolio Theory) Contents Introduction to utility theory Relative and absolute risk aversion Different forms of utility ... - Value at Risk (VaR) is the regulatory measurement for assessing market risk. • A risk free asset is an investment whose future value is knows with certainty and whose return is the risk free rate of return. - Introduction to Financial Futures Markets F520 Asset Valuation and Strategy F520 Futures * F520 Futures * What would the hedge look like if we entered a ... - Interest rate risk. There are … Business risk ... - Title: Introduction to Financial Management Author: cob Last modified by: cob Created Date: 8/28/2002 10:15:22 PM Document presentation format: On-screen Show, Enterprise Risk Management For Insurers and Financial Institutions, - Enterprise Risk Management For Insurers and Financial Institutions David Ingram CERA, FRM, PRM From the International Actuarial Association, Review of what we have learned in the last, Incremental cash flows and opportunity cost, Cash flows from the change of working capital, Cash flows from capital investment and disposal, Cash flows from operations revenue cost (cash, Cash flows from operations accounting profit, Now we can apply what we have learned about how, A project costs 2,000 and is expected to last 2, Suppose you buy one share of IBM at 74 this year, What profit do you expect to make for your, What profit do you expect to make for one dollar, Profit per one dollar29.25/740.395 or 39.5, To invest in stocks, investors require a risk, The expected return on a risky security is equal, Expected return risk-free rate risk premium, Risk premium expected return risk-free rate, We can use the variance or the standard deviation, Variance or standard deviation measures weighted, Suppose that there are N states, then the, Stock A has the following returns depending on, First, calculate the mean return or the expected, p1(r1- r-bar)2p2(r2- r-bar)2p3(r3-r-bar)2, Unique Risk - Risk factors affecting only that, Market Risk - Economy-wide sources of risk that, Yes, we can reduce risk by diversification that, Can we understand intuitively why diversification. It measures default and credit migration risk at a 99.9% confidence level over a one-year capital horizon. Risk and return Part 3. Financing and payout decisions • Risk as a hazard or threat (downside risk): this is what managers often mean when talking about risk. Economic risk management is based on long-term investment planning and uses ROI (return on investment) as a fundamental indicator. Chapter 5 Risk and Return After studying Chapter 5, you should be able to: Understand the relationship (or “trade-off”) between risk and return. • Introduction to managing risk Topic Gateway Series . * Finance Is Fun! - Danger and Opportunity: Risk: What is it, how do we measure it and what do we do about it? Risk and return practice problems Prepared by Pamela Peterson-Drake Types of risk 1. RISK AND RETURN This chapter explores the relationship between risk and return inherent in investing in securities, especially stocks. Geometric vs. Arithmetic Average Rates of Return Objective. What is ‘Risk and Return’? The tradeoff between Risk and Return is the principles theme in the investment decisions. The level of risk and required rate of return (ror) are directly related. - Part 1: Introduction and Overview of Investment A broad map of the territory * S.B.Khatri - AIM * Fund Flows via Intermediary and Market Markets Intermediaries ... Introduction to Financial Futures Markets. This study explores the relationship between risk and return in context of investment and portfolio management. Rates of Return Variation around a central tendency or mean may be presented visually by constructing a histogram as shown on this slide, and studying the dispersion or spread of possible outcomes. … Arial arial Symbol MT Symbol Times New Roman Default Design MathType 5.0 Equation Bitmap Image Risk and Return - Part 1 Introduction to VaR and RAROC Risk and Return - Part 1 Introduction to VaR and RAROC Determine Capital Needs for an Insurance Company Volatility Determines Capital Needs Low Volatility Volatility Determines Capital Needs High Volatility Define Risk Coherent Measures of Risk … MIT SLOAN SCHOOL OF MANAGEMENT 15.414 Class 9 Road map Part 1. CrystalGraphics 3D Character Slides for PowerPoint, - CrystalGraphics 3D Character Slides for PowerPoint. Risk is associated with the possibility that realized returns will be less than the returns that were expected. In other words, it is the degree of deviation from expected return. Risk Management Parts of a Risk Register Risk Description – Clear description of risk, its cause & consequence Controls / Actions already in place – List what is actually happening now which reduces the impact of a risk or its likelihood Impact – scale of 1 to 5 (1 = minor, 5 = catastrophic) (Note this is to be residual impact only) Or use it to create really cool photo slideshows - with 2D and 3D transitions, animation, and your choice of music - that you can share with your Facebook friends or Google+ circles. Share Risk. In investing, risk and return are highly correlated. HAZARD IDENTIFICATION, RISK ASSESSMENT & RISK CONTROL OBJECTIVE To identify types of Hazard in work area To make Risk Assessments To suggest Risk Controls to ... – A free PowerPoint PPT presentation (displayed as a Flash slide show) on PowerShow.com - id: 3b9ced-ODBmO Joe Molumby B Comm. If you are already a member to Money Instructor, then click here to sign-in. It measures default and credit migration risk at a 99.9% confidence level over a one-year capital horizon. RISK AND INSURANCE I. The Adobe Flash plugin is needed to view this content. In the start, important terms such as, investment, portfolio management, risk and return are explained with help of examples. An overview of market performance Measuring performance Return and risk me asur es Summary and Conusioncls. This chapter discusses some of the theories around risk management and develops a threat scenario, and then presents the risk management analysis. Financial Management – A free PowerPoint PPT presentation (displayed as a Flash slide show) on PowerShow.com - id: 695889-OTZjM Risk as the uncertainty of returns. Market risk is also called Beta Risk or Non-Diversifiable Risk and is connected with Socio-political & Macroeconomic events that occur on global basis. 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