《金融风险管理》课程PPT教学课件（Risk Management and Financial Institutions）Chapter 01 Introduction

LntroductionChapter 1RiskManagementandFinanciallnstitutions3e,Chapter1,CopyrightJohnC.Hull2012

Introduction Chapter 1 Risk Management and Financial Institutions 3e, Chapter 1, Copyright © John C. Hull 2012 1

Riskvs ReturnThere is a trade off between risk andexpected returnThe higher the risk, the higher theexpectedreturn2RiskManagementandFinancialInstitutions3e,Chapter1,CopyrightJohnC.Hull2012

Risk vs Return ⚫ There is a trade off between risk and expected return ⚫ The higher the risk, the higher the expected return Risk Management and Financial Institutions 3e, Chapter 1, Copyright © John C. Hull 2012 2

Example (Table1.1, page 2)Suppose Treasuries yield 5% and thereturns for an equity investment are:ProbabilityReturn0.05+50%0.25+30%0.40+10%0.25-10%0.05-30%3RiskManagementandFinancialInstitutions3e,Chapter1,CopyrightJohnC.Hull2012

Example (Table 1.1, page 2) Suppose Treasuries yield 5% and the returns for an equity investment are: Risk Management and Financial Institutions 3e, Chapter 1, Copyright © John C. Hull 2012 3 Probability Return 0.05 +50% 0.25 +30% 0.40 +10% 0.25 –10% 0.05 –30%

ExamplecontinuedWe can characterize investments by theirexpected return and standard deviation ofreturnFor the equity investment:Expected return =10%Standard deviation of return =18.97%RiskManagementandFinancialInstitutions3e,Chapter1,CopyrightJohnC.Hull20124

Example continued ⚫ We can characterize investments by their expected return and standard deviation of return ⚫ For the equity investment: ⚫ Expected return =10% ⚫ Standard deviation of return =18.97% Risk Management and Financial Institutions 3e, Chapter 1, Copyright © John C. Hull 2012 4

CombiningRiskyInvestments (page5)0p=/w0 +w202+2pw,W20,02μp=WMi+W2H216ExpectedReturn (%)14μ, =10%12μ2 =15%100, = 16%8602 = 24%4p= 0.2StandardDeviation2of Return(%)00510152025305RiskManagementandFinancialInstitutions3e,Chapter1,CopyrightJohnC.Hull2012

Combining Risky Investments (page 5) Risk Management and Financial Institutions 3e, Chapter 1, Copyright © John C. Hull 2012 5 1 2 1 2 2 2 2 2 2 1 2 P = w1 1 + w2 2 P = w1  + w  + 2w w   0 2 4 6 8 10 12 14 16 0 5 10 15 20 25 30 Standard Deviation of Return (%) Expected Return (%) 0.2 24% 16% 15% 10% 2 1 2 1  =  =  =  =  =