Financial Engineering & Portfolio Theory -CM2 Actuarial Exam

🎓 Financial Engineering & Portfolio Theory -CM2 Actuarial Exam

By MJ the Fellow Actuary 🚀

Section 1 - Introduction to Financial Markets and Market Efficiency 📊

Dive into the world of financial markets with Michael Jordanc, where we'll explore the Stock Market, Bond Market, Derivative Market, and Risk markets. Discuss the intricacies of each and understand their roles in the financial ecosystem.

• Financial Markets 🏦

  • Explore the different types of markets and their significance in the financial system.

• Efficient Market Hypothesis (EMH) 📈

  • Delve into the Strong, Semi, and Weak form of EMH.
  • Analyze the evidence supporting and challenging each version.

• Can You Beat the Market? 🧐

  • Assess the investment success of Warren Buffet vs John C Bogle.
  • Explore the philosophies behind Active vs Passive Strategies.

• Covid-19 Investment Strategies 🦠

  • Gain insights into MJ's personal strategies before and after the pandemic.

• What Caused the Great Recession? 🏗️

  • Uncover the root causes of the global recession in 2008.

Section 2 - Utility Theory 🎭

Understand how individuals make decisions and the theories behind their choices. From Irrational Behaviour to Axioms of Utility, this section covers it all.

• Irrational Behaviour 🧠

  • Engage with the St Petersburg Paradox and question the rationality of our decisions.

• Consumer Choice Theory 🛍️

  • Analyze indifference curves and budget lines to understand decision-making around bundles.

• Utility Theory 📉

  • Observe the utility of money and explore different attitudes towards risk.

• Axioms of Utility 🔍

  • Examine Completeness, Transitivity, Continuity, and Independence axioms.

• Expected Utility Theory 🎲

  • Consider how consumer choice theory works with uncertainty in mind.

• Stochastic Dominance 🏆

  • Learn about Absolute, First Order, and Second Order Dominance concepts.

Section 3 - Behavioural Economics 👫

Discover the psychological aspects that influence economic decision-making. From heuristics to biases, this section will help you understand the cognitive factors at play.

• Heuristics 🤔

  • Understand how mental shortcuts can lead to rationalization.

• Framing 📝

  • Learn about how presentation influences decision-making.

• Herd Instinct 🐑

  • Explore the tendency to follow trends and behaviors of a group.

• Anchoring 🌀

  • See how first impressions can anchor our decisions.

• Myopic Loss Aversion 🎯

  • Understand the fear of losses and its impact on decision-making.

• Mental Accounting 🧮

  • Examine how people categorize money in their minds.

• Bias - (Self Serving, Confirmation, Availability, and Familiarity) 👀

  • Identify the various cognitive biases that can affect decision-making.

• Story Believing 📖

  • Discover how narratives can shape our economic perceptions.

• How to Fight Irrationality ⚔️

  • Learn strategies to combat irrational decisions.

Section 4 - Risk Measures 🔮

Measure risk like a pro with this section, learning the tools and concepts necessary for effective risk management.

• Variance and Standard Deviation 📊

  • Understand the mathematical underpinnings of these key risk measures.

• Value at Risk (VaR) ⌛️

  • Explore how VaR is calculated and used to measure market risk.

• Credit Risk and Liquidity Risk 🏦

  • Delve into the specifics of credit and liquidity risks in financial markets.

Section 5 - Portfolio Theory and Diversification 🌐

Learn how to build a robust portfolio that maximizes returns while minimizing risk through diversification.

• Diversification Benefit 🌱

  • Understand the concept of diversification and its benefits in reducing unsystematic risk.

• Optimal Portfolio 🎯

  • Learn how to construct an efficient frontier and find the optimal portfolio.

Section 6 - Capital Asset Pricing Model (CAPM) 📊

Cap off your learning with the Capital Asset Pricing Model, a cornerstone in understanding the relationship between risk and expected return for investments.

Prepare to conquer the CM2 Actuarial Exam with confidence as you delve into these foundational concepts of financial engineering and portfolio theory. With Michael Jordanc's expertise, you'll be well-equipped to navigate the complexities of finance and make informed investment decisions. 🌟

Ready to embark on this journey? Let's get started! 🚀💪