Portfolio risks

• Generally we do not consider the risk of one security, but the risk of one portfolio because the risk of each security is diversified away.
• 2 main components of a risk:
price risk = risk of change in the value of your asset
default risk= risk that your counterpart does not reimburse you. From state to company financial assets: default risk is added. In case of bankruptcy bondholders may be reimbursed, but not shareholders
In the long-run, returns vary according to the risk. The expected value includes a premium for risk.
Between 1924 and 1994 in the United states.

	nominal yearly rate	real yearly rate	yearly standard deviation
Treasury bill	3,7	0,6	3,3
S&P stocks	12,2	8,9	20,2

Risk is measured by the standard deviation. The standard deviation of the market portfolio is 20 % in the long-run, but it was 15 % these last 30 years and much more this year.

Diversification >>

Corporate finance

PART ONE: CAPITAL EXPENDITURE
The present value
Investment decisions
Practical problems in capital budgeting
Firms evaluation

PART TWO. BASICS OF FINANCE
The financial markets
Options
The market efficiency
Risk
Mergers, Acquisitions, and Corporate Control
International Financial Management

PART THREE FINANCING DECISIONS
Corporate financing
Dividend policy and capital structure

PART FOUR FINANCIAL MANAGEMENT
Financial planning
Short-term financial management

Course created and updated by Dr David Chelly, PhD in Management sciences from the University of Tours.