What’s up in Finance 4335 for tomorrow (3/23), next Thursday (3/25), and one week from tomorrow (3/30)

During tomorrow’s class, we will discuss the Capital Market Theory lecture note, and if time permits, work through a capital market theory class problem.  Next Thursday’s class meeting (March 25) will be devoted to a review session for the 2nd midterm exam in Finance 4335, which is scheduled to occur (in-class) on Tuesday, March 30.

The formula sheet for Midterm Exam 2 is now available at http://fin4335.garven.com/spring2021/formulas_part2.pdf. This document will also be available on Canvas when you take the exam on Tuesday, March 30. The three most important Midterm 2 – related documents are the formula sheet, the Finance 4335 synopsis for Midterm Exam 2, and the sample Midterm 2 exam booklet that I just posted on the Sample Exams page.

As you prepare for next Thursday’s midterm exam review session, please take the time to work through the sample exam, and also devote some time reviewing Midterm 2 exam topics, which include insurance economics, asymmetric information, portfolio theory, and capital market theory.

Finance 4335 – Decision Making under Risk and Uncertainty, part 3 Video

This short (less than 30-minute, at https://baylor.instructure.com/courses/132670/external_tools/1217) video covers, in its entirety, the Decision Making under Risk and Uncertainty, part 3 lecture note scheduled for live presentation on Thursday.  Unfortunately, the power outage caused by a severe ice storm in Austin during our class meeting that day prevented a live presentation of this material, so this is a recorded version of what we would have covered had the power outage not occurred.  It is important for everyone to view this video prior to class on Tuesday, February 16, as it provides an important context for the Decision Making under Risk and Uncertainty, part 4 lecture note scheduled for that day.

Also in the Finance 4335 Media Gallery on Canvas, I have posted a recording entitled “Finance 4335 Review of concepts covered February 2-9”.  This recording comprises the first 26 minutes of Thursday’s class, cut short, of course, by the power outage. In this video, I review concepts covered in the February 2-9 asynchronous recordings which also appear as part of the Finance 4335 Media Gallery on Canvas; particularly, the so-called “exact” and Arrow-Pratt (“approximate”) methods for calculating risk premiums.  The class problem and solutions related to these topics are available at http://risk.garven.com/2021/02/13/risk-aversion-class-problem-solutions/.

Important announcement: we will meet synchronously tomorrow via Zoom for our regularly scheduled 2-3:15 class session

Finance 4335 (Risk Management) will meet synchronously tomorrow via Zoom for our regularly scheduled 2-3:15 pm class session.  We’ll devote our attention to a (very) brief review of the expected utility model,  and devote most of our time to a discussion of the Decision Making under Risk and Uncertainty, part 3 lecture note, which, among other things, considers broader measures of risk beyond variance.

If you haven’t already watched the February 2nd, 4th, and 9th lectures that are available in the Media Gallery on Canvas, be sure to do so prior to tomorrow’s class.  Tomorrow’s lecture topic builds on the foundational principles set forth in those lectures, so you will get much more out of tomorrow’s class meeting if you are already familiar with the concepts covered there.

One final note – The due date for Problem Set 3 was 2/11; it is now 2/16.

This week’s lectures on the topic “Decision Making under Risk and Uncertainty (part 1)”

At this link, https://baylor.instructure.com/courses/132670/external_tools/1217 (alternatively, simply visit the Media Gallery on the Finance 4335 Canvas site), you’ll find two lectures based on the lecture note entitled Decision Making under Risk and Uncertainty, part 1 .

Even though we did not meet synchronously on either Tuesday, Feb. 2 or Thursday, February 4, these two videos fully cover the “Decision Making under Risk and Uncertainty, part 1” lecture note scheduled for this week in Finance 4335. Your assignment is to watch both of these videos before Tuesday, February 9; this way, you will be completely up to speed and prepared to tackle the “Decision Making under Risk and Uncertainty, part 2” lecture that I have scheduled for February 9.

How to know whether you are on track with Finance 4335 assignments

At any point in time this semester, you can make sure that you are on track with Finance 4335 assignments by monitoring due dates on Canvas and on the course website.  Links for future class meetings, quizzes, problem sets, and exams appear on the Canvas “To Do” list.  Links for readings (along with their due dates) appear on http://fin4335.garven.com/readings/, and links for problem sets (along with their due dates) appear on http://fin4335.garven.com/problem-sets/.  In the case of assigned readings, students are required to complete a short (10-minute) readings quiz prior to the start of class for each reading assignment due date; the window for completing this task begins at 1:30 p.m. CT the day before the reading assignment is due.

Lagrangian Multipliers

There is a section in the assigned “Optimization” reading due Thursday, January 21 on pp. 74-76 entitled “Lagrangian Multipliers” which (as noted in footnote 9 of that reading) may be skipped without loss of continuity. The primary purpose of this chapter is to re-acquaint students with basic calculus and how to use calculus to solve so-called optimization problems. Since the course only requires solving unconstrained optimization problems, there’s no need for Lagrangian multipliers.

Besides reading the articles entitled “Optimization” and “How long does it take to double (triple/quadruple/n-tuple) your money?” in preparation for this coming Thursday’s meeting of Finance 4335, make sure you have completed the student information survey, subscribed to the Wall Street Journal, and subscribed to the course blog (if you haven’t already done so).

Course Requirement: Email subscription to the Risk Management Course Blog (instructions given here)

A course blog has been established for Finance 4335 at the address http://risk.garven.com; it is also linked from the “Course Blog” button located on the course website. This resource provides a convenient means for Dr. Garven to distribute important announcements outside of class. Topics covered on the course blog typically include things like changes in the course schedule, clarifications, and hints concerning problem sets, information about upcoming exams, announcements concerning extra credit opportunities, and short blurbs showing how current events relate to many of the topics covered in Finance 4335.

All students enrolled in Finance 4335 are required to subscribe to the course blog via email. Students may also follow the course blog on Facebook or Twitter but are not required to do so.

Email Subscription Instructions:

In order to subscribe to the course blog via email, go to http://risk.garven.com and enter your email address in the form provided on the right-hand side of that webpage:

After clicking “Subscribe”, the following information will appear on the screen:

Next, check for an email from “Risk Management Blog <donotreply@wordpress.com> ”:

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Next, simply click the “Confirm Follow” button. This will cause you to receive the following email:

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From that point forward, whenever I post to the course blog, you will immediately receive a nicely formatted version of the blog posting via email.