Portfolio theory and its application in investment process.

It is a theory of investment which attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets.

MPT is a mathematical formulation of the concept of diversification in investing, with the aim of selecting a collection of investment assets that has collectively lower risk than any individual asset. It could be achieved, because different financial instruments have different characteristics – correlations, risks and return on investments.

Investing is a tradeoff between risk and expected return. In general, assets with higher expected returns are riskier. For a given amount of risk, MPT describes how to select a portfolio with the highest possible expected return. Or, for a given expected return, MPT explains how to select a portfolio with the lowest possible risk.

An investor can reduce portfolio risk simply by holding combinations of instruments which are not perfectly positively correlated. (-1<correlation<1).

41. Relations between international business law, European business law and Polish business law.

No country with weak rule of law can survive in long-term. International law is pretty similar in lots of aspects, but details are adjusted to different regions (death sentence, for instance, drug tolerance, criminal liability, etc).

Freedom of commercial activity; Antitrust and Fair Competition regulations; Consumer protection; Product liability (Office or Competition and Consumer Protection; Consumer's Federation, Association of Polish Consumers).

42. Antitrust law: cartels, abuse of dominant position, mergers, state aid, collective interests of consumers.

A cartel is a formal (explicit) agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry,

Market dominance is a measure of the strength of a brand, product, service, or firm, relative to competitive offerings. There is often a geographic element to the competitive landscape. In defining market dominance, you must see to what extent a product, brand, or firm controls a product category in a given geographic area.

1) Four-firm concentration ratio (sum of market shares of 4 largest companies, <40 – competitive market, >60 - oligopoly)

2) Herfindahl-Hirschman Index – summing squared percentage market share of the 50 largest companies in an industry (1000-1800 – competitive industry).

Institutions too big to fail. Monopolies grasp higher profits with a lower output.

43. Business forms – partnerships and corporations.

Partnerships – two or more owners, both are limited for the debt and other legal obligations. It is taxed only once. Incomes are liabilities are based on the proportional ownership of the partnership. Problems: personal conflicts, risk, expensive capital.

Corporation – owned by its stockholders, the liability is limited to the amount of money they have invested in the firm. Taxed twice: corporate income tax and then tax on incomes of the shareholders. Easy to raise capital. Problems: complex structure, possible bureaucracy, lack of flexibility.

44. Regulatory governance: infrastructural sectors under law.

Transportation infrastructure; Energy infrastructure; Water management infrastructure; Communications infrastructure; Solid waste management; Earth monitoring and measurement networks (Meteorological monitoring networks; Tidal monitoring)

Sustainability is a new trend, it touches all above mentioned sectors. Closed-loop systems in sustainability.

Talk about Earth quakes in Japan, BP's rig disaster in Mexican Gulf, Water pollution and resources scarcity around the world. Approaches towards military infrastructure (conscription in Germany). Costs of environmental clearances. Problem: Lack of standards and integrity, power of corporations, growing problems in other sectors that must be addressed as the one of the most importance.

45. Private law: property, contracts, securing contracts, inheritance, bill of exchange, letter of credit.

Property law is the area of law that governs the various forms of ownership in real property (land as distinct from personal or movable possessions) and in personal property, within the common law legal system. Types: Possession, Transfer of property, Lease. Intellectual property: patent (20 years), industrial design (25 years), moral rights (not transferable), economic rights (70 years from the death of the author).

A contract is a legally enforceable agreement between two or more parties with mutual obligations. The remedy at law for breach of contract is "damages" or monetary compensation. In equity, the remedy can be specific performance of the contract or an injunction. At work compensation is called severance. Product sales: Warranty and Guarantee. It is possible to withdraw from the contract within 10 days not explaining reasons. Exceptions - pereodic issues, nespapers, DVD movies, etc.

Inheritance is the practice of passing on property, titles, debts, and obligations upon the death of an individual. It has long played an important role in human societies. The rules of inheritance differ between societies and have changed over time. People write a will. Some of assets can not be transferred.

A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee. A common type of bill of exchange is the cheque (check in American English), defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date. Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are not used as often today. A bill of exchange requires in its inception three parties—the drawer, the drawee, and the payee. The person who draws the bill is called the drawer. He gives the order to pay money to the third party.

The parties to a letter of credit (аккредитив) are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without prior agreement of the beneficiary. 1) After a contract is concluded between buyer and seller, buyer's bank supplies a letter of credit to seller. 2) Seller consigns the goods to a carrier in exchange for a bill of lading (conformation of shipment); 3) Seller passes bill of lading for payment from buyer's bank. Buyer's bank exchanges bill of lading for payment from the buyer. 4) Buyer provides bill of lading to carrier and takes delivery of goods.

46. Matrix determinant: definition, methods of calculation, properties.

Determinant is a mathematical object that characterizes a matrix. It is very useful for analyzing solutions for systems of linear equations. If the determinant is zero, matrix doesn’t have unique solutions and is said to be singular. A singular matrix doesn’t have an inverse matrix. Example:

Rule 1: a11*a22-a12*a21

Rule 2: Triangle rule

Rule 3: Sarrus’s scheme – extend the matrix with the copy of the first two columns, then use diagonal rule.

Properties:

1. Switching two rows or columns changes the sign.

2. Multiples of rows and columns can be added together without changing the determinant's value.

3. A determinant with a row or column of zeros has value 0.

6. Any determinant with two rows or columns equal has value 0.

47. Single variable functions: definition, graph and properties.

Y=F(x) – a single variable function. This is a type of a function, when for each value of an independent variable X there is one and only one value of the dependent variable Y.

Examples: y=x³; y=cos(x)

Graph: for instance, the relationship between demand for goods and services and their price. Qd=2x-1. The graph will be a line. Another example: air temperature outside (y) at a particular time of the day (x). The graph will look differently.

Date: 2015-02-03; view: 743