Finance 4335
Did you know Baylor University is hosting the 2024 Collegiate Day of Prayer? All Baylor students are encouraged to come together tomorrow (February 29) at 7 p.m. for the worship and prayer service in Waco Hall. The Hankamer School of Business will also have Foster Room 143/144 reserved tomorrow from 8 a.m.-5 p.m., with stations for prayer guidance for students, faculty, and staff.
For more information, visit baylor.edu/dayofprayer.
I have uploaded the midterm 1 grades, along with current attendance/participation, quiz, problem set, and Finance 4335 course grades, to Canvas.
As stated in the course syllabus, final numeric course grades will be determined according to the following equation:
Final Course Numeric Grade =.10(Attendance and Participation) +.10(Quizzes) +.20(Problem Sets) + Max{.20(Midterm Exam 1) +.20(Midterm Exam 2) +.20(Final Exam),.20(Midterm Exam 1) +.40(Final Exam),.20(Midterm Exam 2) +.40(Final Exam)}
As I noted in my January 29th blog posting entitled “Finance 4335 Grades on Canvas”, as the spring semester progresses and I continue to collect grades in the attendance, quiz, problem set, and exam categories, then the course grade listed on Canvas will dynamically incorporate that information on a timely basis for each student. Now that we have Midterm 1 Exam grades, the course equation that I am now using (until Midterm 2) is:
Course Numeric Grade after Midterm 1 = (.10(Attendance and Participation) +.10(Quizzes) +.20(Problem Sets) +.20(Midterm 1))/.6
Here are the current grade statistics, broken down by grade category, for the 31 students enrolled in Finance 4335 this semester:
Although actual letter grades won’t be assigned until after the final exam, hypothetically, you can determine where your course letter grade currently stands by comparing it with the course letter grade schedule in the course syllabus.
If you are disappointed by your performance to date in Finance 4335, keep in mind that the final exam grade automatically double counts in place of a lower midterm exam grade. If both midterm exam grades are lower than the final exam grade, the final exam grade replaces the lower of the two midterm exam grades.
If any of you would like to have a chat with me specifically about your performance on Midterm 1, or generally about your grades in Finance 4335, then by all means, stop by my office (Foster 320.39) 3:30-4:30 pm TR, or set up a Zoom appointment with me.
… are available at Insurance Economics Class Problem and Insurance Economics Class Problem Solutions…
From WSJ: “The more than $200 million Paul and Alejandra Foster Pavilion at Baylor University opened in January, with proceeds from the endowment helping to fund its construction.
WSJ (2/14/2024) Page 1 story about Baylor’s 2 billion dollar endowment, and how it is managed…
On problem set 4, part D, most of you had no apparent difficulty in correctly establishing that the sum of the differences between the cumulative distribution (CDF) for risk 2 and the CDF for risk 1 is positive. However, many of you drew the wrong conclusion, claiming that since the sum of differences between 
The one-page exam formula sheet includes section 4, which explains that risk i dominates risk j, in both the first and second cases when 1) the cumulative distribution function (CDF) of the ith risk is either less than or equal to the CDF of the jth risk for all states (first order dominance), or 2) the sum of the differences between the jth risk CDF and the ith risk CDF for all states is positive (second order dominance):
While the math behind first and second order stochastic dominance is summarized in my optional reading entitled “Technical Note on Stochastic Dominance and Expected Utility”, the intuition for first and second order stochastic dominance can be seen in the figures featured on pages 9 and 12 of my Decision-Making under Risk and Uncertainty, part 4 lecture note.
In the above figure from page 9 of my Decision-Making under Risk and Uncertainty, part 4 lecture note, the G risk has 50% of a $0 payoff, and 25% each of a $10 payoff and a $100 payoff. The F risk involves removing 25 percentage points off the $0 payoff and adding 25 percentage points extra to the $100 payoff, and both F and G have a 25% probability of $10 payoffs. Graphically, this ensures that F first order stochastically dominates G; i.e., G(Ws) is greater than or equal to F(Ws) for all s, which also implies that EF[U(W)] > EG[U(W)]. Intuitively, the picture which gets rendered by this analysis shows that most of the probability mass of the stochastically dominant risk (in this case, F) lies below the probability mass of the stochastically dominated risk (in this case, G). Furthermore, since risk F first order stochastically dominates risk G, risk F also second order stochastically dominates risk G because G(Ws) – F(Ws) > 0 for $0 and $10 payoffs, and G(Ws) – F(Ws) = 0 for the $100 payoff.
Next consider the figure from page 12 of my Decision-Making under Risk and Uncertainty, part 4 lecture note:
Here, G(Ws) – F(Ws) > 0 for payoffs ranging from 1-5, G(Ws) – F(Ws) < 0 for payoffs ranging from 5-8, and G(Ws) – F(Ws) = 0 payoffs ranging from 8-12. Thus, there is no first order dominance. However, since the positive difference between G(Ws) – F(Ws) for payoffs ranging from 1-5 exceeds the negative difference between G(Ws) – F(Ws) for payoffs ranging from 5-8, the sum of G(Ws) – F(Ws) over the entire range of payoffs comes out positive. Thus, risk F second order stochastically dominates risk G, which also implies that EF[U(W)] > EG[U(W)].
… are available at http://fin4335.garven.com/spring2024/ps4solutions.pdf.
The Stochastic Dominance class problem set is available at http://fin4335.garven.com/spring2024/StochasticDominanceClassProblem.pdf.
The Stochastic class problem set solutions are available at http://fin4335.garven.com/spring2024/StochasticDominanceClassProblemSolutions.pdf.
From: Finance 4335 Student <Finance_4335_Student@baylor.edu>
Date: Monday, February 12, 2024 at 3:10 PM
To: Garven, James <James_Garven@baylor.edu>
Subject: FIN 4335 Midterm Exam 1
Good Morning, Dr. Garven,
I have a quick question about the Midterm Exam 1 next week. I would like to know when the Sample Midterm 1 Exam Booklet and the Midterm Exam 1 Formula Sheet will be available.
Also, can we use the Midterm Exam 1 Formula Sheet formula sheet on the exam?
Best,
Finance 4335 Student
_________________________________________________________
From: Garven, James <James_Garven@baylor.edu>
Sent: Monday, February 12, 2024 at 5:24 PM
To: Finance 4335 Student <Finance_4335_Student@baylor.edu>
Subject: Re: FIN 4335 Midterm Exam 1
Dear Finance 4335 Student,
My answer to both of your questions is yes. I have already uploaded the Sample Midterm Exam #1 to the course website so that students have ample time to review it before the Midterm Exam #1 Review Session, which is scheduled for our class meeting on Thursday, February 15.
Regarding the Midterm Exam #1 Formula Sheet, I have also uploaded this document to the course website (@ http://fin4335.garven.com/spring2024/formulas_part1.pdf), and I will include this same document as an attachment to the Midterm Exam #1 booklet on the exam day itself, which is Tuesday, February 20.
Dr. Garven