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Topics in Investment Analysis

Topics in Investment Analysis. Topics in Investment Analysis - Rationale. CFA CBOK Filler 2 – Credit Completion course. Topics in Investment Analysis - The 40,000 Foot View. Macroeconomics Fixed Income Derivatives Alternative Investments Real Estate Commodities Hedge Funds

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Topics in Investment Analysis

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  1. Topics in Investment Analysis

  2. Topics in Investment Analysis - Rationale • CFA CBOK Filler • 2 – Credit Completion course

  3. Topics in Investment Analysis - The 40,000 Foot View • Macroeconomics • Fixed Income • Derivatives • Alternative Investments • Real Estate • Commodities • Hedge Funds • Private Equity

  4. Macroeconomics • Aggregate Supply and Demand • Classical, Monetarist, and Keynesian Views • The Fed and Money Creation • Inflation, Unemployment, and Business Cycles • Fiscal Policy • Spending • Taxes • Stabilizing the Business Cycle

  5. The Fixed Income Zoo • Corporate, Treasury, Muni, Sovereign, Foreign • Short-Term, Long-Term • Rating • Fixed, Variable, Inflation-protected, more exotic • Asset-backed menagerie • Swaps

  6. Fixed Income Risks • Interest Rate • Reinvestment • Call and Prepayment • Yield Curve • Credit • Liquidity • Exchange Rate • Volatility • Inflation • Event • Sovereign

  7. Fixed Income – Term Structure • Constructing a yield curve • Theories of the yield curve • Expectations • Liquidity Preference • Preferred Habitat, or Market Segmentation

  8. Fixed Income Valuation • Basic Bond Valuation • Using YTM • Using period-specific “zero” rates • Duration and interest rate risk • Valuation with Embedded Options • Convertibles, Callables, Puttables, etc. • Models • Option models • Simulations

  9. Fixed Income – Securitization • Mortgages, Home equity loans, Auto loans, Consumer loans, Credit cards, Commercial assets, etc. • Manner of securitization: • Pass-through pools • CMOs and tranches • Credit enhancements • Credit default swaps

  10. Fixed Income – Miscellaneous • Commercial paper market • Special Purpose Vehicles (Off-balance-sheet entities) • Structured notes (adding sweeteners) • Inverse floaters

  11. Derivatives • Option-like derivatives • Will be covered only to get a handle on the embedded options in fixed instruments • CMOs, structured notes, etc. • We may go into valuation approaches for these

  12. Alternative Investments • Real Estate • Commodities • Hedge Funds • Private Equity

  13. Our Current Financial Mess • Bubbles (e.g. in housing prices) • World liquidity • Breakdown of discipline and due diligence. • Originators • Securitizers • Rating Agencies • Ultimate Investors • Role of Credit default swaps and other chained liabilities • Role of Mark-to-Market

  14. The Road Out? • Fed Actions • Monetary • Purchase of bad assets • Intervention with players in crises • TreasuryActions • TARP, TALF, PPIP, etc. • Mortgage relief • Fiscal enlargement and borrowing • Reregulation • Dodd “Too Big to Fail” bill • What to do with Fan and Fred?

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