Domande esame Financial Economics 2023/2024, Prove d'esame di Economia Finanziaria

Scarica Domande esame Financial Economics 2023/2024 e più Prove d'esame in PDF di Economia Finanziaria solo su Docsity! 1 DOMANDE ESAME FINANCIAL ECONOMICS 1. Spiegare il significato del dividendo e la differenza con la cedola. Spiegare il DDM e la duration: The dividend and the coupon represent the periodical income flows respectively of stocks and bonds. The dividend is the part of the earnings that are distributed to the shareholders as a consequence of a specific decision of the administration: there is not an obligation to pay it since depends on the results and specific decision not to reinvest them. The dividend represents a fundamental factor to determine the intrinsic value of the stock, indeed the Discounted Dividend Model computes the intrinsic value of the stock as discounted sum of constant growing dividend for an infinite horizon: the rate of growth is either a geometric average growth of past dividend or the product between the retention rate and the ROE; the discount factor is the required rate of return on the stock computed with a CAPM formula (in function of beta). The coupon instead is the payment to bondholder computed as percentage to the face value to pay at maturity and in this case, there is the obligation for the issuer to pay it periodically. The duration represents the average time period for the bond to repay the investment and is computed as weighted average of time period with weight equals to the proportion of discounted cash flow on the total cash flow (price): a measure of bond sensitivity. For bond management the duration can be also used in other ways, for instance it is the elasticity of bond prices to interest rate variation so it can be used to compute to approximate the price variation for interest rate variation. In addition the duration is also for bond portfolio the maturity date that immunize from interest rate changes. We cannot compute it properly for the stocks since these has not a deterministic trend in the cash flows. 2. Describe the relation between the us treasury and corporate bond interest rate curves and the monetary policy of the US Central Bank (Federal Reserve). In case of recession would you invest in corporate bonds or in treasury bonds. Would you use derivatives to hedge your investments? When we compare two yields curves with similar characteristics (maturity, coupon…) the main difference is represented by the risk premium that is associated to the riskier issuer (in this case the corporate), respect to the safer one ( in this case the treasury). This premium in terms of the curves is defined as yield spread and is the pointwise difference between the two curves (z spread in spot rate curve). This spread can be deeply influenced by the policies of the Central Bank, which, in order to pursue its main target of stability of prices, can influence the interest rates/credit conditions and more in general causing recessions/expansions: the riskier issuer will be more sensible by the action of the Central Bank and therefore the spread will likely variate according to the policies (increase with restrictive policies and decrease with expansionary policies). In case of recession usually the investors prefer to assume defensive position and prefer to move from higher risk bond, like the corporate one, which suffer generally more by the conditions, to governmental bonds. However, in case the investor find particularly attractive the income flow of some riskier bonds it could be advisable to hedge the credit risk. A common instrument in this case are credit default swap, which are contracts in which the bond holder pay periodical premiums to another subject who will guarantee, in case of negative events like default of bankruptcy, a reimburse of the value lost. Another instrument could be to purchase a put (payoff negatively correlated to underlying) to protect the investment. 2 3. Differenze tra CAPM, APT e modello Black & Litterman According to the CAPM the rate of return of the asset is described not in terms of total variability but in terms of systematic risk: the risk related to market wide sources, computed as ratio between the covariance of the asset return respect to the market normalized on market variance, the “beta”. The expected returns here are described linearly, by the “Security Market Line” as sum of the risk-free rate of return and the compensation from systematic risk, which is the product of the specific beta and the market risk premium, which is computed as E(R market)- RFR. On the SML the market portfolio has beta=1, so that all the asset below this threshold on the line are “safer” while the ones above are “riskier” in terms of systematic risk. Given that this line gives for all the securities the fair return given the risk, we can spot undervalued asset if these are above the SML (higher return than fair level for that risk), while the overvalued asset are below the SML (lower return than fair level for that risk): the vertical distance is the “alpha”. The APT also focus on the relationship between undiversifiable/systematic risk and return (above the RFR), but in this case the systematic risk is not described in terms of a single market element, but in terms of different factors, which represents some fundamental macroeconomic factors, each one associated with a specific risk premium. According to this model, a fundamental way to achieve profit is to spot mispriced asset from the E(r) function and from this apply an arbitrage strategy to gain RF profits: in this model a correct price is computed from the law of one price/ no arbitrage. To exploit the limited arbitrage opportunity is necessary to build from correctly priced assets a synthetic portfolio that replicate the mispriced asset and from there shorting the most expensive portfolio and having a long position to the other to have 0 total exposure to market risk with positive profits. In both model we consider idiosyncratic risk to be negligible because of diversification of portfolios (its risk negatively related to the number of assets in the portfolio). The Black Litterman model instead combine both the elements of market equilibrium analysis, with personal views of the investors on the returns, expressed in terms of relative views to other assets or absolute views. Therefore the first part of the analysis is centered on the computation of equilibrium returns combining the covariance matrix, the market capitalization weights and the risk aversion factor, while the second part approximate as normal distribution the vector of views: combining together the two elements and updating the returns (application of Bayes Theorem) by new market data constantly, we obtain returns which does not only see to the past but are also forward looking. 4. Quali sono i principali strumenti di politica monetaria e quali gli impatti del quantitative easing sulla curva dei tassi d'interesse The principal instruments of monetary policy are: rules, interest rates to banks and bond purchasing. Important interest rates that the central banks control are the ones imposed to the banks to deposit money to them or to lend money from them, therefore influence the availability of liquidity for banks and consequently are primary rates that influence the credit conditions for the private borrowers. A second type of instruments are the rule and especially the rules on the balance sheets for the banks, for example on the necessary amount of reserves in the balance sheets or the securities when borrowing: also in this case the central bank influence the level and the condition at which banks can inject liquidity into the system. Finally, the bond purchasing programs, like the QE, aim in the first place to directly inject liquidity to the issuers, strengthening their condition, and secondly to increase the demand for the bond, pushing up the prices for the bond and secularly pushing down the interest rates: usually the interested on the bonds are related to some bank interest rates. In addition the interest rate curve has also another impact from these programs since the support from the CB to the issuer reduce the risk associated and therefore the risk premium lowers, determining a lower spread of the curves respect to the less risky ones. 5 11. Quali sono gli indicatori di analisi di bilancio di un’azienda che meglio ne rappresentano la solidità̀? The solidity represent the ability of the firm to maintain a balance between the debt and the assets and the equity in order to avoid to not be able to face the financial obligation quickly. The most important are: • Financial leverage= Total assets/equity: see how much of assets are financed by equity (rest by debt). • Debt/equity ratio= Total debt/equity : proportion debt and equity to see if correct balance. • Long term debt/ capital= Long term debt/ long term capital : proportion investment/financing same horizon. • Interest/capital ratio= Interest expenses/total capital : standardize interest on asset assess dimensions. 12. Quali sono le differenze tra la teoria di Markowitz, l’EMH e la Finanza Comportamentale? Markowitz portfolio Theory is based on the idea that investors are rational and efficient, so that they invest by choosing the minimum level of risk (variance) given a certain expected return and that they should reason not in term of single assets but considering them in their mutual relationship: the objective is to reduce risk (standard deviation) by finding asset negatively correlated. The graphical representation of the portfolios that are optimal in this sense is the “efficient frontier of portfolios” that is the locus of all portfolios that minimize the variance for any given level of expected returns: the investor should select according to its indifference curve and according to the tangency of this with the efficient frontier. Then, Sharpe extended this idea introducing the Capital Market Line, which describes the expected returns of a portfolio on the efficient frontier as sum of RFR (from the RF asset, introduced to benchmark the risk-return relationship) and a compensation for taking the risk as product of the portfolio standard deviation (total risk) and the premium for the risk, that is called Sharpe ratio (ratio between excess return of the portfolio M respect to the RFR divided by the standard deviation of M). The CML, where the portfolio is the market one M, has the highest is tangent to the efficient frontier at the portfolio M: M is the efficient portfolio. Then, according to the model, the investor can modify its exposure to the market portfolio according to its risk profile (according to the indifference curve) moving along the CML by borrowing or lending at RF rate (possible by assumption). In this theory some underlying assumptions are contrary to the EMH: infinite predictivity of inflation and interest rates movement and single horizon of investment. According to the Efficient Market Hypothesis the prices reflects all the information currently available to the investors, but not the future/not available information and when these are known the prices, thanks to immediate aggregate competitive pressure, absorb them. However, this movement is unpredictable ex ante and therefore the prices follow a random walk. Depending to the interpretation of the idea of “all information currently available” the idea of efficiency can be strong (all present information), Semistrong (all private and public but not confidential information) or weak ( only public information). As a consequence, with EMH the technical analysis has not explanatory power (impossible to get future information from trends) and even the fundamental analysis is limited, since it is possible that the information used does not give more information on the intrinsic future value than the price itself: to increase the return is necessary to increase the risk associated. In this context, considering the transaction cost, the most efficient strategy is the buy and hold of highly diversified portfolios. The idea that the investor are rational and process correctly the information into the prices has been criticized by the research area of Behavioral Finance, which consider the investors as influenced both by emotions (e.g. overreacting to some information or overconfidence to the ability of achieving alpha with active management) and by cognitive bias (e.g. framing, that is having different behavior on the same type of action depending on the way the problem is proposed). An example of behavioral discovery is the socalled Prospect Theory, according to which the individual indifference curve is S shaped, that is that the individual are not risk averse (contradicting return equilibrium models) but are loss averse: they are risk averse for the positive variation and risk taker for the negative ones. In addition, the individual does not act in terms of level of the indifference curve (that is distance to the origin) but in terms of the change on the curve, that is that they move their reference point to analyze an investment according to the last result. 6 13. Considerata un’azienda tecnologica che ha registrato nell’anno vendite pari a 100.000 euro, costi per 50.000 euro e spese generali e amministrative per 20.000 euro, calcolare GPM, OPM e ROE. Inoltre indicare quali sono gli indici di valutazione di un titolo azionario più usati facendo qualche esempio. GPM= gross profit/net sales= 50% OPM= gross profit-administrative and general costs/net sales= 30% Subtracting from operative profit interest and taxes we would get net income which divided by the total equity gives the returns on equity. The most used index to evaluate a title are EPS= earnings/number of common shares, which represent the earnings related to each share and therefore gives an image of the actual prospects of dividend; P/E= price of a common stock/EPS, which show how is bigger the investment in the stock to the related earnings, and therefore possible dividend, this indicator should be related with the profitability indexes of the firm to see its capacity to generate value and to other market indicators. Indeed a high value might indicate both a poor ability to generate income but also high expectation of the investors towards the firm. Given similar expectation (e.g. same sector) a firm with a lower P/E is preferable because the investor pay less every EPS $ ; PBV= market price of a stock/ Book Value of share of equity, which represents the relative valuation of the firm given by the markets (forward looking) respect to the one done by accounting (present looking), and also in this case can be considered as indicator of expectation from the market. However, also in this case is necessary to consider how the equity is evaluated and how the firm produces values in order to spot any future growth perspectives. In both cases to give an opinion of the size of EPS or PBV or PE is necessary to look at it in a time and in an industry perspective. Some tech firm for example even if have low EPS, because they are not producing great earnings still, possess high values of PBV and PE because the market consider in that moment high perspectives in terms of future development of their market (e.g. tesla had P/E equals to 1100 in 2020). 14. Quale approccio di gestione utilizzereste per un portafoglio di titoli obbligazionari High Yield? Quali sono le differenze tra la duration e la convessità̀ dei titoli obbligazionari? In order to manage a portfolio with HY, we use a top-down approach. First of all we consider the macroeconomic context to see the business cycle phase and the monetary policy, since there is evidence that during negative phases of business cycle or restrictive policies, the condition of less solid issuer (HY) might deteriorate more rapidly. However, if we do not consider as standalone asset the HY bond, we could use it to increase the duration of a portfolio in phases of interest rates increase to protect against capital losses (cushion bond). Then, we should look if the risk-return relationship of the bond justify the risk through a numerical quantification of this relationship. In case the relationship is favorable, we could protect the investment with derivatives, like the CDS, where we pay a swapper to gives a guarantee of reimburse in case of negative events, like default or bankruptcy. Another useful derivative could be the bond swap in order to exchange the bond and the connected cash flows from a higher rated bond to the HY bond. The duration approximate the elasticity of prices to yield variation, therefore we could use it in the equation to obtain a first order approximation of the price variation for yield variation. However the linear variation is too conservative because it doesn’t consider that the P-yield curve is convex, therefore a second order approximation, using the rate of change of price for yield variation called “convexity”, gives a better approximation especially for low variations. 7 15. Qual è il significato della correlazione tra gli indicatori economici e il rischio associato ai titoli? There are more layers of indicators used in order to assess the risk associated to the title. The first one is at macroeconomic level, indeed the profitability (business risk) or the financial risk related to the firm are influenced by the phases of business cycle, since not all firms behave in the same way during the phases according to the type of products sold and by the reaction of consumer to the phases, by the monetary policies of the CB, which influence for example the availability of credits to finance the activities, and by international factors like the currency rate. Then, the indicators at sectoral level are critical because it’s important to assess the current status and future perspectives of certain activities to see which is the level of risk. Then, we look at the indicator of the specific firm to see both if the firm is profitable, therefore if has a structural capacity to create value so to generate income for the investor (business risk), we see if the firm has financial risk, that is if the firm has a correct management of way of financing the asset, and we see the solidity of the firm, that is the relationship between equity and debt. 16. Sapendo che un’azione passerà da 100 a 98$, un BTP da 100 a 80 e il dollaro da 1,10 a 1, che derivati useresti per coprire il rischio? Assuming to be a Italian investor holding US shares, the reduction of $/€ rate means that our € investment the has lost $ values, and if we expect this trend to follow we need to fix the rate of exchange now for the future in order to reduce the exposure of the weaker investment (see price reduction), for example using a currency swap, where we exchange payment at floating rate with payments at constant rate; we could use also currency futures or forwards to fix now the exchange rate of payments for the future and hedging the risk of future reduction. For the BTP using a CDS could be a useful tool if we fear that the interest rate increases could undermine the ability of the issuer to repay the debt, however this is unlikely to be the case because BTP is a governmental bond, therefore the issuer is strong enough to exclude this possibility. Therefore, if we fear future losses of value of the securities both at Italian and US level, we could use a protective put approach, that is purchasing a put on the title hold, in this case if the price fall more we could sell it and obtain the strike price, limiting therefore the downward losses, this in exchange of a premium payment for the option. If we are more risk taker, and we want to speculate in volatility of prices we could use as speculative instrument the straddle strategy (put + call purchase with the same maturity and strike price), which gives profits both in case of a strong increase (e.g. a rebound in prices after the decrease) and in case of stronger price reductions: the negative side of this strategy is that is costly since we need to but put and call options and therefore, we need strong prices variation. To profit from low price decrease a bearish spread could be more appropriate.