Basic knowledge of financial markets and financial securities.
2. Basic concepts in probability, statistics and mathematics (calculating expected value and variance of random variables and linear combinations of random variables; calculating derivatives of simple functions; basic notions of optimization).
3. Basics of Bloomberg and/or Thomson Reuters.
1. Understand how markets value securities
2. Understand the portfolio management process
3. Implement basic asset allocation
4. Build efficient portfolios
5. Implement risk management techniques
6. Evaluate portfolio performance
Additional Assurance of Learning (“AOL”) objectives:
LO1B. Successfully collaborate within a intercultural team,
LO2A. Assess the values of the organization in which they work
LO3C. Organize change management processes
LO4A. Appraise the performance of a team
LO5B. Construct expert knowledge from cutting-edge information
LO7B. Formulate strategically-appropriate solutions to complex and unfamiliar challenges in their professional field
The objective of this course is to acquire theoretical and practical knowledge about the classic modern portfolio management framework. Using the modern portfolio theory of Markowitz, the course introduces the basic principles of the portfolio management process. To this end, the well-known risk-return trade-off to which financial assets and investments are subject is introduced. The expected return represents the reward of such investment portfolios and needs to be balanced with portfolios’ risk. Large rewards usually bear greater risk. In this light, the choice of an appropriate risk measure is emphasized, and the optimal trade-off between risk and return is also defined. A particular attention is paid to portfolio diversification so as to reduce portfolios’ risk and to improve their risk-return trade-off (i.e. efficient diversification). Moreover, two important principles are emphasized among which the capital allocation between risky assets and risk-free assets, and the asset allocation between risky assets. The asset allocation process drives the risk-return trade-off of investment portfolios. Finally, portfolio performance measures are studied. Such measures help rank investment portfolios according to their performance profile (e.g. reward per unit of risk)
