ABSTRACT
INTRODUCTION This chapter briefl y presents some interesting topics, often less discussed in typical textbooks, that an investor should know about forming a well-diversifi ed portfolio. These topics include credit derivatives and alternative investments, which stand in contrast to the traditional investments we covered in the previous chapters. We begin with two important international interest rate parities (covered and uncovered) and present some simple foreign-exchange investment strategies. Next we discuss at some length the various types of credit derivatives, specifi cally credit default swaps, as well as other important, frequently used swaps, highlighting their roles in today’s globalized economy. We then continue by presenting and discussing the alternative investment asset class, which has risen in importance over the last decade. Specifi cally, we explore some important alternative investments such as real estate, hedge funds, infrastructure, private equity, and other tangible alternative investments. Finally, we dedicate a section to “putting it all together,” which should serve as an overview of what you have learned thus far. Hopefully, since you have become aware of the risks, costs, and benefi ts of investing, you will be able to proceed with caution and wisdom.
