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4 posts from January 2016


Book Review: Financial Risk Management for Dummies

Financial Risk Management for Dummies. 2016. By Aaron Brown. John Wiley & Sons, Ltd., www.wiley.com. 384 pages, $26.99.

The dummies to whom Financial Risk Management for Dummies is addressed are not outright novices. Rather, they exemplify the maxim that a little bit of knowledge is a dangerous thing. Aaron Brown, chief risk officer of AQR Capital Management, devotes much of the book to dispelling mistaken notions about his subject.

“Risk management is not about predicting or preventing disaster,” he writes. Neither, says Brown, is it about estimating probabilities or outcomes. The “frequentist” approach, with its analogies to casino games, has only limited application. “If all risks were playing roulette or drawing cards,” Brown states, “we wouldn’t need risk managers.” There is little in the book about measuring risk because generally speaking, risk that is measurable can be avoided, insured, hedged, or neutralized via diversification. Contrary to the likely expectations of many investment professionals, Value at Risk (VaR) does not enter the discussion until Chapter 6.

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Life Lessons from an Unexpected Source

UntitledThe week after Thanksgiving, feeling remorseful after all the gluttony that ensued over the holiday weekend, I decided to drag myself to my favorite spin class. I expected to feel energized and accomplished from a nice, intense workout, but I didn’t expect that I would also come away reminded of some of life’s most important lessons.

Jogging on that bike jogged my memory of four key life lessons!

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Investment commentary numbers: How to get them right

UntitledInvestment commentary calls for lots of numbers: benchmark and portfolio returns, economic data, and more. When you get those numbers wrong, you undercut your credibility and embarrass yourself.

I have some ideas about how you can avoid mistakes by proofreading and checking your facts.

My expensive mistake

A bad experience impressed me with the importance of checking numbers. Reading the professionally printed copy of my employer’s third-quarter commentary, I noticed a goof. It referred to the second quarter, instead of the third quarter, in one spot. This happened even though four of us had read the piece before it went to the printer. However, the eye tends to read what it expects to see. We all glossed over my error. Oops!

That was an expensive mistake because we had to get the piece reprinted. However, at least we avoided the embarrassment of clients seeing our mistake. Also, it spurred me to develop techniques for catching numerical errors. 

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The Great Mismatch: Addressing Barriers to Global Capital Flows (Part V)

PART V: Ideas for Navigating Capital Flows 

To succeed in the evolving global capital landscape, long-term institutional investors will need to be at the forefront of re-thinking long-standing assumptions and re-shaping markets. Enough success factors have already been identified to serve as a rough guide for investors to navigate the growing opportunities in emerging markets, while mitigating risks, in both the near term and beyond. (See Exhibit below.)

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January 7, 2016

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CFA® Level I 4-Day Boot Camp

Thursday November 12, 2015
Instructor: O. Nathan Ronen, CFA

CFA® Level II Weekly Review - Session A Monday

Monday January 11, 2016
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CFA® Level III Weekly Review - Session A Wednesday

Wednesday January 13, 2016
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CFA® Level III Weekly Review - Session B Thursday
Thursday January 21, 2016
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CFA® Level II Weekly Review - Session B Tuesday
Thursday January 26, 2016
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