[FIN 367] - Final Exam Guide - Comprehensive Notes for the exam (34 pages long!)

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29 Nov 2016
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Financial assets = claims on the value of real assets (i. e. equity, debt, stocks and bonds) Financial markets and economy: allocation of risk = investors can select securities consistent with their taste for risk. Separation of ownership = with stability comes agency problems (when an agent acts in a matter inconsistent with how they should act on behalf of principle) Consider the risk and return expectations, risk tolerance and preference for volatility. Consider the value of the securities relevant to their prices. Types of investment approaches: top-down = allocate the portfolio across asset classes, then select individual securities within the asset classes. Decide how much of your portfolio to put in stocks, bonds, and so on: bottom up = select assets that appear attractive then attempt to diversify and allocate across asset classes. Find securities that appear attractive in their pricing.