Questions on Investment Essay Example | Topics and Well Written Essays - 2000 words

Questions on Investment - Essay Example With the combination of these securities in the portfolio investors can minimize their risk without sacrificing their expected return. Ans 1b In table 1, we can see correlation coefficients of five different funds, if we want to invest in any of the two funds in the portfolio with minimum risk. For example Aviva Property and HSBC Asian Growth with correlation coefficient 0.10 can minimize the risk without sacrificing any of their expected return. In such a combination of these funds the risk will be diversified effectively without decreasing the level of expected return whatsoever. Ans 1c We have a portfolio of two funds, Aviva property and HSBC Asian Growth. We have also combined other funds and analyzed their risk exposure and found that their portfolio has minimum levels of risk. This investor is investing 50% of the cash in both the funds minimizing its risk without change in the expected return. Aviva property has risk of 2.3% with negative return while HSBC shows 6.5% risk with a good level of return. If investors will invests separately in these funds, the risk will be more but in other combinations the risk will also be greater. Ans 1d i) As shown in figure 1, the curved line denoted with (a) is referred to as Efficient frontier while the straight line denoted by b is referred to as capital market line. The other points mentioned in the figure are, D which is the risk free rate and C is the market portfolio. ii) When an investor has a portfolio at point E as shown in figure 1, where return is also decreasing but not that much with the risk. Every investor wants to hold the C point where only market risk is to be faced, but all the other risks are diversified and at point E the risk associated with the portfolio is high but both systematic and unsystematic risk are in its way. Only unsystematic risk is diversifiable but other risks can also be shown at beta. iii) Every investor tries to reduce the risk associated with its portfolio. If the investor is wi lling to accept 10% of risk as shown in figure 1 it is difficult to get good results. As the risk is high and return is also high, this position becomes more sensitive to the market fluctuations. At this position a slight change in the market will affect the portfolio more. Investors can go for the risk free return but it is usually unrealistic as allowances for the differences in borrowing makes the model more complicated. Ans 2a In US-style option, the buyer has the right to exercise at any time before the expiry of the option and counterparty must follow in the part of the buyer of option for execution. Counterparty doesn’t have any right to deny the execution of the option before the expiry of the risk associated with the counterparty. The reason for counterparty risk is basically due to the credit risk of the option writer (Klein and Yang 2010, p.1) Ans 2b The biggest advantage of using options contracts is that it gives stability and security to the investors and the tr aders. This makes them contribute more in the market operations and also greatly contribute to the economy. It reduces the risks involved and also increase investors confidence thus they buy more options the agents sells. Since unsystematic risk is normally unverifiable, the risk occurs due to external factors which are unpredictable. In order to minimize

Risk Study Report (occupational health and safety) Research Paper

Risk Study Report (occupational health and safety) - Research Paper Example Individual and commercial insurance is a good way to reduce the personal as well as commercial financial risks. I have selected the J. Paul Getty Museum as the visiting location. The location is situated in Los-Angeles. Los Angeles itself is blessed with beautiful landscapes and the building of the museum is made uniquely so that it would attract as many visitors as the museum can hold. On the other hand the entry to the museum is absolutely free, while visitors are charged $15 for the parking. However, after 5p.m the parking is free too. Museums are good places to find cultural, religious and ancient aspects of the location. Around 1.3 million people visit the museum each year (The J. Paul Getty Museum, 2012). The most significant feature of the tourism business is the capability of the operators to deal with the risks and associated factors regarding the tourism business. It is equally viable for the operators to maintain a smooth, receptive and cost efficient insurance that will ensure to meet the legal necessities and requirements. Risk management ensures to make clear reduction in the unnecessary and unintentional events. However, it is important for the risk managers to develop such strategies to reduce the impacts of the unplanned events. The third important perspective of the risk management is to improve the capability to have full control on all the events and associated risks and maintain cost-efficient insurance within the business environment. Risk management strategies will ensure to enhance the recognition of the risks, analyze the risks and the make strategies to reduce the risk. It not only benefits the organization but also the individuals. On the other hand, the risk management techniques will help to face the accident and help us to be prepared for any accidents. The techniques will also reduce the severity and the after effects of the accidents. Financial damages are heavily influenced by the