Equity and Fixed Income 2400-QFU1EFI

There will be 7 meetings covering the following material:
1. Return and risk.
a. Total returns, annual average returns
b. Arithmetic and geometric average returns
c. Log returns
d. Log-normal model of equity returns
e. Forecasting equity returns using log-normal model, Cornish-Fisher VaR and Monte Carlo simulation
2. CAPM and cost of capital
a. Overview of the CAPM model
b. Estimating risk free rate
c. Estimating beta (individual and sector betas)
d. Equity risk premium
e. Country risk premium
3. Equity valuation
a. Overview of equity valuation methods
b. Economic equivalence of dividends and buybacks
c. Dividend Discount Model – derivation
d. DDM – variants
e. Comparative equity valuation
4. Stock indexes
a. Principles of equity index building
b. Price and total return indexes
c. Indicators for indexes (P/E, P/BV, EV/Sales, dividend yield)
d. Long run source of equity index returns
e. Forecasting index returns
f. Implied equity risk premium
5. Interest rates
a. Quoting and compounding
b. Yields and returns
c. Promised yields and expected yields
d. Calendar conventions
e. Spot and forward rates
f. Zero-coupon rates
6. Term structure of interest rates
a. Overview of interest rate curves
b. Constructing interest rate curves, interpolation
c. Valuation of bonds
7. Modeling interest rate curves
a. PCA analysis
b. Nelson-Siegel model