Discuss the investment process and the general steps

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Reference no: EM13874313

PART 1

1. Discuss the progression of the Markowitz portfolio model into the capital market theory

2. Describe what is meant by the security market line being the graphic representation of the capital asset pricing model

3. Contrast the differences between option writing and option buying

4. Why isn't the Black-Scholes option model based upon an American style option?

PART 2

1. Discuss the investment process and the general steps relating to it

2. Briefly discuss the three phases in the investor life cycle

3. Explain the dilemma posed when attempting to measure the risk tolerance or preferences of a client, especially as it relates to

(a) indifference or utility curves and,

(b) Prospect Theory

4. Discuss the importance of every financial advisor creating an investment policy statement for each client

5. Distinguish between the different risk-adjusted performance measures: the

(a) Sharpe ratio,

(b) Treynor ratio, and

(c) Information ratio

PART 3

1. Briefly explain why having similarly correlated assets in a portfolio may actually be more risky than having assets with a low degree of correlation

2. Describe how historical and expected relationships between assets aid in the generation of an "efficient frontier" of potential portfolios for consideration

3. Distinguish between strategic asset allocation and tactical asset allocation

4. Briefly explain how the "January effect" anomaly contradicts the efficient market hypothesis or theory

Reference no: EM13874313

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