Chapter 12 Flashcards
Another name for market risk is ____
Systematic Risk
Volatility of returns is one definition of ____
Risk
This term refers to the portion of a security or portfolio’s total risk that is not related to fluctuations in the overall market.
Unsystematic Risk
4 of the more common risk faced by investors are:
- Inflation
- Credit risk
- Liquidity risk
- Currency risk
Approximately 68% of all returns lie within ___ standard deviations of the average or expected return.
One
Approximately 99% of all returns lie within ___ standard deviations of the average or expected return.
3
___ is a measure of the systemic risk of an investment
Beta
The ___ or ___ determines how well the regression line fits the actual data. The regression analysis calculates the percentage of the variability in the security’s returns (as measured by the security’s variance) that can be explained by the variability in the market index’s returns.
Coefficient of determination or R-squared.
____ measures the total risk of a security or portfolio.
Standard Deviation
The in the money portion of a call or put option is known as the options ____
Intrinsic value
Investors construct a ____ by purchasing an out of money put while simultaneously writing an out-of-money call on a held stock position.
Collar
What’s the formula for the number of contracts needed to hedge a stock portfolio?
H = MVp * B / (l * m)
Name the 3 monetization structures used.
- Equity forward
- Exchangeable debenture
- Equity collar
____ is a mechanism offerd by banks and their investment dealer subsidiaries that allow individuals to hedge the price exposure of a concentrated position in a publicly listed stock and raise money against that hedged position cost-effectively.
Equity monetization
How is the positive return on a principal-protected note (PPN) taxed if the PPN is held to maturity?
As interest income
