Econ 133
Probability
Random Variables
Probability Mass Function
Probability Density Function
Properties of Distributions
Cumulative Distribution Function
Expected Value
Expected Value
Properties of Expectation
Properties of Expectation - Proof
Variance
Variance
Standard Deviation
Covariance
Covariance
Properties of Variance
Properties of Variance - Proof
Properties of Covariance
Correlation
Normal Distribution
Normal Density
Normal Distribution
Standard Normal Distribution
Standard Normal Distribution - Proof
Standard Normal Distribution - Proof
Sum of Normals
Sample Mean
Sample Mean (Cont.)
Sample Variance
Other Sample Moments
Markets
Asset Classes
Indexes and Funds
Trading
Risk and Returns
Rates of Return
Risk and Risk Premiums
Portfolio Optimization
Asset Allocation
Portfolio Optimization
Portfolio Optimization with Many Risky Assets
Index Models
Motivation
Motivation
Single-Factor Model
Single-Factor Model
Decomposing Risk
Decomposing Risk
Using an Index as a Factor
Using an Index as a Factor
Single-Index Model
Single-Index Model
Expected Return-Beta Relationship
Why
\(\alpha\)
Must Be Zero
Single-Index Regression
Security Characteristic Line
Security Characteristic Line
Advantages of the Model
Advantages of the Model
Advantages of the Model
Advantages of the Model
Cost of the Model
Index Model Portfolios
Index Model Portfolio Coefficients
Index Model Portfolio Risk
Index Model Portfolio Risk
Index Model Diversification
Index Model Diversification
Index Model Diversification
Index Model Example
Index Model Example
Index Model Example
Index Model Example
Bonds
Bond Prices and Yields
The Term Structure of Interest Rates
Options
Call Options
Call Options
Call Options
Call Options
Call Option Example
Call Option Example
Put Options
Put Options
Put Option Example
Put Option Example
Moneyness
American vs. European
Notation
Call Option Payoff (Buyer)
Call Option Payoff (Buyer)
Call Option Payoff (Buyer
Call Option Payoff (Seller)
Call Option Payoff (Seller)
Put Option Payoff (Buyer)
Put Option Payoff (Buyer)
Put Option Payoff (Buyer)
Speculation and Hedging
Speculation and Hedging
Speculation and Hedging
Speculation and Hedging
Speculation and Hedging
Speculation and Hedging
Speculation and Hedging
Protective Put
Protective Put
Protective Put
Protective Put
Covered Call
Covered Call
Straddle
Straddle
Straddle
Spread
Bullish Spread
Bullish Spread
Collar
Protective Put Alternative
Put Call Parity
Put Call Parity Example
Put Call Parity Example
Put Call Parity Example
Econ 133
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Risk and Returns
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Risk and Returns
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Contents:
Rates of Return
Risk and Risk Premiums