FIN 2984 Lecture 6: Class 6
5 Oct 2016
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Document Summary
How will you allocate your assets (% in each asset class) High yield bonds - oil & gas companies make up a large part of the high yield b plummeted. Some risk can be diversified away - invest in different industries. Modern portfolio theory (mpt) and its resulting mean-variance optimized portfolios do no portfolios when the tide goes out, all ships decline with it. The real risk to a portfolio is that periodic large market declines create large losses for a po unachievable. Risk should therefore be redefined as the probable frequency and probable magnitude of. Larger the loss, the amount needed to make it up multiplies. Black swans - events that shock the investment markets ex. Old school: traditional style-based asset allocation ld bond market bc oil and gas has: not result in well diversified a portfolio, making its goals e of future loss. Diversification is superficial - all ships tend to sink during bear markets.
