Finance (Basic)
Ludek Benada
Department of Finance
Office 533
75970@mail.muni.cz

Investment
An investment is a specific activity leading to acquisition of assets, that ensure its owner a flow
of income. This cash flow can also be negative. Related to saving…
An asset is anything that has any measurable value.
What is not an investment: …
Arbitrage: …

Types of assets
nTangible (Buildings, land, cars...)
n
nIntangible (Know-how,…)
n
nFinancial (Cash, Deposits, Equity s., Debt s., Derivative contracts, Forex)

Equity securities
How to choose the right stock?
qFA
qTA
qBA

Fundamental Analysis
Short run: Intrinsic value ≠ market value
Long-term: Intrinsic value = market value
Steps of FA:
oEconomic analysis
oIndustry analysis
oCompany analysis

Technical Analysis
qThe value of a company or security doesn't matter.
q
qThe goal is to find out the trends in the market.

Behavioral Analysis
q Useful to use in times when financial markets behave irrationally.
q Investors sometimes fail in to extreme optimism/pessimism (the news are overestimated).

Behavioral Analysis
Choose the better option:
You invest $ 300.00
1.You have 30% probability to gain $ 1,000.00.
2.You have 70% probability to lose your investment.

Portfolio management
σ(P)
r(p)
B
A
C
EPF, CML,CAPM
ELTON/GRUBER; MODERN Portfolio Theory and Investment Analysis

Bonds
Plain Vanilla
Price
Ytm, Forward rate
Coupon
Accrued interest
Zero bond
Duration (Macaulay, Modified, Dollar)
Convexity
BLACKE D.; Financial Market Analysis

Thank you for your attention