Discuss on one page or less the mean-variance metrics

Discuss on one page or less the mean-variance metrics

Subject: Business    / Finance   
Question
1-Discuss on one page or less the mean-variance metrics associated with Markowitz as
a risk management tool. To do that, listen carefully to the Taleb video where he refers to
“mean-variance nonsense”. Explain what he means by this. Recall and comment about
what you learned in Wk 3 about Markowitz.

2-Explain the relationship between the ‘characteristic line’ and the ‘security market line’
and then discuss the practical significance of the ‘capital asset pricing model’.

3-As the only person in your company with an MBA, the boss asks you to make a twopart
elevator speech (well-structured, pithy, and short) about:
a-causes and lessons learned from the financial meltdown of 2007-08
b-significance of lessons learned to your business, a 40-employee medical practice.
Prepare that elevator speech.

4-Using the #9 (Melloan) and #10 (Morgenson) reading items below, digest the
conservative position from Melloan in The Wall Street Journal and the liberal position
from Morgenson in The New York Times, as if you are a legislative analyst for a new,
independent US senator. Then, using information from the articles and any other
readings in the course, prepare a position paper for her about the issues at hand.

5-You will learn in Wk 6 that bond prices are volatile just like stock prices, that the price
changes in bonds are inversely related to changes in interest rates, i.e. when interest
rates rise, bond prices fall – and vice versa. It is expected that later this year interest
rates will begin to rise. That means that investors holding bonds in their portfolios will
see a loss. Suppose you sit on the pension committee in your company, with oversight
of a $100 million pension fund. The investment manager you hired to run the bond
portion ($75 million) does not intend to hedge against this interest rate risk (rising
interest rates causing your bond prices to fall). Discuss how such a hedge might work
and the pros and cons of the investment manager’s intent.