# Investments

The evaluation of the risk and return of a financial asset is called security analysis. Traditionally, this process uses accounting information to model the relevant cash flows and market information to estimate an appropriate discount rate. This is also called fundamental analysis. Investments also provides an introduction to portfolio optimization and the Black-Scholes Option Pricing model. Check my library for additional books, blogs, magazines, and movie recommendations.

Textbook – Investments by Bodie, Kane, and Marcus

Assessment

• 2 Exams
• Online Homework completed on the students’ schedule
• Relative Valuation
• Portfolio Optimization in Microsoft Excel
• Efficient Frontier
• Estimate Beta(s) using Microsoft Excel and Bloomberg
• Equity Analysis

### Topic Coverage

• Securities Markets
• Markets – Principle-Agent | Adverse Selection
• Short Selling a Stock – Khan Academy | Edspira
• Initial Public Offering (IPO) – Khan Academy
• Risk and Return
• Diversification and Portfolio Calculations – MIT
• Uncertainty – Yale
• Value at Risk – MIT
• Portfolio Theory
• Efficient Frontier – MIT(1) | MIT(2) | MIT(3)
• Portfolio Optimization
• Linear Algebra Review – Khan Academy
• – Matrix Multiplication – Khan Academy
• Portfolio Calculations using Linear Algebra
• – Portfolio Expected Return
• – Portfolio Variance
• Optimal Risky Portfolio – MIT | Yale
• The Capital Asset Pricing Model
• Capital Asset Pricing Model – MIT
• Beta – Edspira
• Estimate Beta – CAPM Regression and Regression Results
• Macroeconomic and Industry Analysis
• The Money Supply – Khan Academy
• Foreign Exchange – Khan Academy
• Balance of Payments – Khan Academy
• Financial Statement Analysis
• DuPont Analysis
• Earnings Quality – Edspira
• Equity Valuation
• Relative Valuation – Rush | Edspira
• The Dividend Discount Model – Rush | Edspira
• Discounted Cash Flow Valuation
• – The Weighted Average Cost of Capital (WACC) – Edspira
• – Free Cash Flow to the Firm – Edspira
• – DCF using FCFF – Edspira
• – Free Cash Flow to Equity
• – DCF using FCFE
• Options
• Put and Call Options – Khan Academy
• Binomial Option Pricing Model – Rush
• Black-Scholes Option Pricing Model – Khan Academy
• Portfolio Insurance