1.Within a small essay, explain the concept of diversification. Provide a definition and reasons for seeking diversification within a portfolio. Give examples of strategies/types of funds that would mostly benefit from diversification, and of strategies that do not usually seek a high diversification. Furthermore, explain what concept is usually applied in order to measure diversification and what the main issue is with this metric. Provide at least two typical examples of asset classes that would diversify a typical portfolio of financial assets.
2.(1)Comment within a small essay on the different types of expected return and related risk, for individual assets and for portfolios as a whole. Explain carefully what each type represents and give examples in each case. What type of expected returns does the Capital Asset Pricing model capture? What type of expected return and risk you are exposed to if you have the FTSE 100 INDEX only in the portfolio. (2)What is fiat money? What other types of money do you know? Choose one example of fiat money and one example of real money, and explain briefly the advantages and disadvantages of each.
3.(1)How would you approach a job interview for a portfolio manager position? What type of proof would you provide that indicates your past performance is good and hence you should get the job? How many different ways and metrics do you have to measure this performance?(2) As a portfolio manager, you have the option to keep part of the fund in cash. Explain within a small essay why you would, and why you would not, want to do that. Explain more generally what are the benefits of keeping a certain part of the portfolio in cash and what are the risks in doing so, especially when interest rates are close to zero.
4.(1)What is immunization within a portfolio management context? Give a detailed description and examples. How can immunization be achieved for a fixed income strategy? What type of fund would normally employ immunization techniques? Write a small paragraph and carefully justify your answers.(2)A portfolio manager is running a strategy whose tracking error last year was close to zero.
Based on this information only, can you comment on how successful this strategy is? More generally, provide the definition of tracking error and describe briefly whether a high or low tracking error is preferred, and why.About 1600-2000 words totally.
There are four questions totally, each question about 400-500 words, no more than two references for each question. Try to use the reference from the file attached below as much as possible.
Requirements: around 1500-2000 words | .doc file
