Peter Schiff. Schiff is known for his bearish views on the US economy and US dollar, and his bullish views on commodities, foreign stocks and foreign currencies. Schiff also voices strong support for the Austrian School of economic thought, first introduced to him by his father.[8][9] Early life and education[edit] Financial career[edit] Schiff began his career as a stockbroker at a Shearson Lehman Brothers brokerage.[3] In 1996, Schiff and a partner acquired an inactive brokerage firm, renamed it Euro Pacific Capital, and began operating it from a small office in Los Angeles,[13] relocating the Firm to Darien, CT in 2005.[14] Euro Pacific Capital Inc. is currently headquartered in Westport, Connecticut, with offices in Scottsdale, Arizona, Boca Raton, Florida, Newport Beach, California, Los Angeles and New York City.[15] It specializes in non-U.S. markets and securities.
Economic and public policy views[edit] In August, 2012, Schiff criticized the Ryan Budget Plan, saying it is "too little too late. " Home | Euro Pacific Capital. Peter Schiff Show, Peter Schiff Radio Show, PART 3 of 8, First Show, 10-18-2010. Financial risk. A science has evolved around managing market and financial risk under the general title of modern portfolio theory initiated by Dr. Harry Markowitz in 1952 with his article, "Portfolio Selection".[7] In modern portfolio theory, the variance (or standard deviation) of a portfolio is used as the definition of risk.
Types of risk[edit] Asset-backed risk[edit] Risk that the changes in one or more assets that support an asset-backed security will significantly impact the value of the supported security. Risks include interest rate, term modification, and prepayment risk. Credit risk[edit] Foreign investment risk[edit] Risk of rapid and extreme changes in value due to: smaller markets; differing accounting, reporting, or auditing standards; nationalization, expropriation or confiscatory taxation; economic conflict; or political or diplomatic changes.
Liquidity risk[edit] Asset liquidity - An asset cannot be sold due to lack of liquidity in the market - essentially a sub-set of market risk. Credit risk. Types of credit risk[edit] Credit risk can be classified as follows:[3] Assessing credit risk[edit] Significant resources and sophisticated programs are used to analyze and manage risk.[4] Some companies run a credit risk department whose job is to assess the financial health of their customers, and extend credit (or not) accordingly. They may use in house programs to advise on avoiding, reducing and transferring risk. They also use third party provided intelligence. Companies like Standard & Poor's, Moody's, Fitch Ratings, Dun and Bradstreet, Bureau van Dijk and Rapid Ratings provide such information for a fee. Credit scoring models also form part of the framework used by banks or lending institutions to grant credit to clients.
Sovereign risk[edit] Sovereign risk is the risk of a government being unwilling or unable to meet its loan obligations, or reneging on loans it guarantees. Five macroeconomic variables that affect the probability of sovereign debt rescheduling are:[9] See also[edit] Portfolio (finance) Portfolio is a financial term denoting a collection of investments held by an investment company, hedge fund, financial institution or individual.[1] Risk/return plot and Pareto-optimal portfolios (in red) There are many types of portfolios including the market portfolio and the zero-investment portfolio.[4] A portfolio's asset allocation may be managed utilizing any of the following investment approaches and principles: equal weighting, capitalization-weighting, price-weighting, risk parity, the capital asset pricing model, arbitrage pricing theory, the Jensen Index, the Treynor Index, the Sharpe diagonal (or index) model, the value at risk model, modern portfolio theory and others. There are several methods for calculating portfolio returns and performance.
Jump up ^ [1] Investopedia, Portfolio definition and explanation, Retrieved July 2011Jump up ^ [2] Investopedia, Portfolio definition and explanation, Retrieved July 2011.Jump up ^ Markowitz, H.M. (March 1952). Modern portfolio theory. Modern portfolio theory (MPT) is a theory of finance that 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. Although MPT is widely used in practice in the financial industry and several of its creators won a Nobel memorial prize for the theory,[1] in recent years the basic assumptions of MPT have been widely challenged by fields such as behavioral economics. More technically, MPT models an asset's return as a normally distributed function (or more generally as an elliptically distributed random variable), defines risk as the standard deviation of return, and models a portfolio as a weighted combination of assets, so that the return of a portfolio is the weighted combination of the assets' returns.
Concept[edit] History[edit] Mathematical model[edit] This section develops the "classic" MPT model. Risk and expected return[edit] Diversification (finance) There are many types of portfolio diversification. Those quantifiable types may be reduced to only two; systematic diversification and idiosyncratic diversification. Idiosyncratic diversification is increased by simply holding more investments. Equally weighting the portfolio is the approach which maximizes the portfolio’s idiosyncratic diversification. Idiosyncratic diversification is typically easy to achieve. Systematic diversification is typically harder to achieve. Gravity Investments invented and patented a framework for measuring diversification in an integrated framework that equates diversification to dimensionality. The simplest example of diversification is provided by the proverb "Don't put all your eggs in one basket". In finance, an example of an undiversified portfolio is to hold only one stock.
Given the advantages of diversification, many experts[who?] Diversification has no maximum. “Risk parity” is an alternative idea. And asset Y have stochastic return and . . . Is . . Beta (finance) The definition above covers only theoretical beta. The term is used in many related ways in finance. For example, the betas commonly quoted in mutual fund analyses generally measure the risk of the fund arising from exposure to a benchmark for the fund, rather than from exposure to the entire market portfolio.
Thus they measure the amount of risk the fund adds to a diversified portfolio of funds of the same type, rather than to a portfolio diversified among all fund types.[4] Beta decay refers to the tendency for a company with a high beta coefficient (β > 1) to have its beta coefficient decline to the market beta. It is an example of regression toward the mean. Beta is estimated by linear regression. Where ra is the return of the asset and rb is return of the benchmark. Since the data are usually in the form of time series, the statistical model is The best (in the sense of least squared error) estimates for α and β are those such that Σεt2 is as small as possible. where: because: and.
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