What is a yield?
The yield on asset results, in general, is defined as profit related to the capital invested
What are the differences of arithmetic and geometric yields?
Aritmetic is a aproximation
in the event of small yields the arit. Method is also correct
the geometric yield is more precise
the geometric yield includes the compounding effect
What is the probem of time comparison of yields?
the absolute flat yield (no consideration of the time period/ fluctuations during the year)
Annualization of the yield (monthly yield is converted into a yearly yield)
What are the dimensions of investment success
Yield -> return
Risk
Liquidity -> how fast can i convert my invest into money
What are the various concepts that contributed to risk
unexpected loss and gains are both risk/ Deviaion of the expected return
in the narrow sense risk is understodd as loosing mmoney or not reaching a specific goal
Risk is a concept of quantifiable uncertainty
What is the meaning of systematic risk?
market risk
caused by fundamental economic factors
based on market related price changes of a portfolio, benchmarc, index
Name 3 examples for systematic risk!
Equities: Equities fluctuate as a result of changes of the overall fundamental data
Bonds: Due to interest rate changes, e.g. caused by a changed monetary policy, the overall bonds prices change
Property: Tax changes for residential and commercial properties result in a general price change
Can systematic risk be decreased by any tools?
Systematic risk cannot be eliminated by diversification, can often be hedged by Derivatives
What means unsystematic risk
unsystematic risk is also called idiosyncartic risk
it is an individual or equity specific risk
Name 3 examples for idiosyncratic risk!
Equities: Collapse in Sales for a key product
Bonds: Credit ratings risk of a corporate bond
Property: Damage from natural hazards
Can unsystematic risk be decreased with any tools?
it is possible to reduce unsystematic risk by diversifiying the portfolio
What is an other name for the standard deviation
Volatility
Which volatility calculations methods are normally used in practice?
historic volatilities for forecasting purposes
subjective assessment on the basis of large capital market experience
Calculation based on currently traded option prices
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