Risk, Valuation, and Capital Allocation

This unit deepens students’ ability to value securities, manage market and credit risk, and allocate capital using forecasting and analytical tools. Topics include equity strategies (long/short), fixed‑income valuation, derivatives and exotic instruments, portfolio optimization, currency transactions, and evaluating quality of earnings to inform investment and financing decisions.

Learning Objectives

• Analyze and compare long and short equity positions, hedging strategies, options and exotic instruments to select appropriate risk‑management approaches for different investment objectives
• Apply bond valuation techniques, interest rate–exchange rate relationships, and currency transaction types to price fixed‑income securities and manage currency exposure
• Evaluate financial statements, liabilities, owners’ equity, and quality of earnings to estimate firm value and support capital allocation decisions
• Demonstrate forecasting, scenario and sensitivity analysis while identifying common cognitive biases and logical fallacies to make sound investment and financing recommendations