Class on Thursday, September 21 will be devoted to 1) completing the “Decision-Making under Risk and Uncertainty” topic and 2) a review session for Midterm Exam 1, which is scheduled for Tuesday, September 26 (in class). Prior to coming to class on Thursday, you’ll want to review your notes about the “Decision-Making under Risk and Uncertainty” topic, review problem sets 3 and 4, and try solving the Finance 4335 Midterm 1 Exam that I gave during the Spring 2017 semester (solutions are available at http://fin4335.garven.com/fall2017/midterm1_spring2017_solutions.pdf). This way we can have a very productive review session that will enable you to be better prepared for the first midterm in Finance 4335!
Overall, very well on the Problem Set with almost 70% of the class achieving a perfect score. While almost everyone missed at least one question on the quiz, the majority of the class scored 80% or higher. It appears that some of you may need to brush up on your statistics, and it is always prudent to thoroughly check your work to make sure you answer the question asked. Also, always be sure to carefully read the assigned readings in order to perform optimally on the quiz, as there may be some nuances where certain concepts sound similar but are distinctly different.
Thank you for your time and considerations.
… are available at http://fin4335.garven.com/fall2017/ps2solutions.pdf…
Here’s a screen shot from the spreadsheet linked below (slightly modified version of the spreadsheet that we built in class). Here, we find that if risks are independent and identically distributed, then by increasing the number of policies in the risk pool, the probability that the average loss exceeds $1,500 declines as we add policies. Without risk pooling, the probability of a “large” loss of $1,500 is 30.85%; with 5 policies, it is 13.18%, and with 10 policies it is 5.69%. However, if risks are positively correlated, then both unique and systematic risks influence this calculation. For example, with 10 policies that have .1 correlation, the probability that the average loss exceeds $1,500 is 12.57% (compared with 5.69% when there is zero correlation):
Although we are only 3 class meetings into the Fall 2017 semester, I have begun posting Finance 4335 grades to Canvas. If you login to Canvas and look at your grades, you’ll see entries for “Attendance”, “Quizzes”, and “Problem Sets”. The grades listed there are current, up to the grades for the first two quizzes and the first problem set, and reflect the average values in each category.
As I explain in my “Class participation in Finance 4335” blog posting, your class participation grade consists of three components: 1) class attendance, 2) participation in class (by being actively engaged; e.g., asking questions, offering insights, what have you) and 3) participation outside of class (by contributing via social media (Twitter/blog)). Between now and the last day of class, only the attendance component of the Finance 4335 participation grade will be reported on Canvas. Since all grades are reported according to a [0,100] scale, the attendance score indicates the percent of classes that you have attended as of a given point in time.
Going forward, I will try my best to keep the course grade-book up-to-date as the semester progresses. Depending upon your subsequent attendance and performance on quizzes and problem sets, these items will probably change over time. Furthermore, new grade categories will eventually be included; specifically, your two midterm and final exam grades. Once all the data have been collected (i.e., some time after the final exam for Finance 4335 has been graded), I will assign a final participation grade as well as a final course numeric grade. The equation for determining the final course numeric grade and the schedule for assigning final course letter grades (based upon final course numeric grades) appear in the Grade Determination section of the course syllabus.
Overall, well done on the problem set. The majority of you have a very firm grasp of the subject. For those of you that struggled, I would once again suggest studying how to take derivatives and the implications of derivatives very carefully should you wish to do well in the course. Additionally, even if you know the material well, be sure to carefully check your work for any intermediate calculation errors, or for incorrectly reading the question and hence not appropriately answering the question.
… are available at http://fin4335.garven.com/fall2017/ps1solutions.pdf
For your information, Baylor has published a list of Frequently Asked Questions about academic support for students impacted by Hurricane Harvey; see http://www.baylor.edu/response/news.php?action=story&story=184633.
Here are a couple of upcoming extra credit opportunities for Finance 4335. You may earn extra credit by attending and reporting on 1) “The Triumph of the Entrepreneurial Spirit” (scheduled for 4-5:15 in Foster 240 on Thursday, September 14, and 2) “Economic Inequality: Popular Misconceptions and Important Facts” (scheduled for Thursday, October 19 scheduled for 4-5:15 in Foster 240 on Thursday, October 19. In order to receive extra credit for either or both of these talks, you must submit (via email sent to email@example.com) a 1-2 page executive summary of what you learn from each talk . The executive summary for the September 14th talk is due by no later than 5 p.m. on Monday, September 18th and the executive summary for the October 19th talk is due by no later than 5 p.m. on Monday, October 23rd. In both cases, the extra credit will replace your lowest quiz grade in Finance 4335 (assuming the extra credit grade is higher).
For what it’s worth, the Taylor Series Spreadsheet that we worked on toward the end of today’s class meeting is available at http://fin4335.garven.com/fall2017/taylor_polynomials.xls.