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CM2: Financial Engineering & Loss Reserving
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Module 4
Asset Pricing Models
1
The Single-Index Model: Estimation and Interpretation
Describe the single-index model and estimate alpha, beta, and residual variance.
2
Assumptions of the CAPM
State the assumptions of the Capital Asset Pricing Model (CAPM).
3
Deriving and Interpreting the Security Market Line (SML)
Explain the derivation logic of the Security Market Line (SML) and interpret its components.
4
Calculating Expected Returns and Alpha with CAPM
Calculate expected returns and Jensen's alpha using CAPM.
5
Introduction to Arbitrage Pricing Theory (APT)
Describe the Arbitrage Pricing Theory (APT) and its assumptions.
6
Calculating Expected Returns with Multifactor APT
Calculate expected returns using a multifactor APT model.
7
CAPM vs. APT: Assumptions and Applications
Compare and contrast CAPM and APT in terms of assumptions and practical application.
Previous module
Mean-Variance Portfolio Theory
Next module
Stochastic Processes for Asset Prices