Investment Portfolio Management
- provide an overview of institutional details linked to financial markets and the trading process
- provide an overview of historical trends and innovations in financial instruments and trading processes
- provide an overview of various financial instruments
- provide insight into the use of finance theory in investment management
- provide a guide to the measurement and analysis of risk of financial investments
- provide a guide to the measurement of performance of fund management
- address key issues in risk management
- List given types of financial instruments and explain how they work in detail
- Contrast key characteristics of given financial instruments
- Briefly recall important historical trends in the innovation of markets, trading and financial instruments
- Name key facts related to the historical return and risk of bond and equity markets
- Relate key facts of the managed fund industry
- Define market microstructure and evaluate its importance to investors
- Explain the fundamental drivers of diversification as an investment strategy for investors
- Aptly define immunisation strategies and highlight their main applications in detail
- Discuss measures of portfolio risk-adjusted performance in detail and critically analyse the key challenges in employing them
- Competently identify established risk management techniques used
- Financial markets and instrumentsMoney and bond markets; Money market instruments; Bond market instruments; Equity markets; Equity instruments; Derivatives markets; Managed funds; Exchange traded funds; Exchange trading and over-the-counter trading; Clearing, settlements, margin trading, short sales and contingent orders; Regulation of financial markets.
- History of financial marketsHistory of financial innovation; Recent financial innovations (e.g., floating rate debt, zero-coupon bonds, poison-pill securities, swaps, futures); Investment returns in equity and bond markets; Equity premium puzzle
- Active Fund Management and Investment StrategiesHistorical mutual fund performance; Market efficiency and behavioral finance; Return based trading strategies; Performance of hedge funds; Statistical arbitrage.
- Market MicrostructureTypes of markets; Limit Order Markets; Bid-ask bounce (Roll); Adverse selection (Glosten-Milgrom); Optimal insider trading (Kyle); Market microstructure and investment analysis.
- DiversificationExpected portfolio returns and variance; Utility functions and expected utility; Risk aversion; The mean-variance problem; Capital allocation with other utility functions (CARA, CRRA); Estimating covariances: the index model; Abnormal returns: Treynor-Black model; Factor models.
- Portfolio immunizationBond math; Term structure of interest rates; Yield to maturity; Duration; Immunization of bond and equity portfolios.
- Risk and performance measurementTypes of risk; Risk decomposition; Value-at-risk (VaR); Risk-adjusted performance measures; Performance measurement with changing portfolios (market timing).
- Risk managementRisk capital allocation; Put option protection; Portfolio insurance with calls; Nonlinear payoffs; Extreme risk; Hedging volatility; Hedging credit risk.
- Participation in lectures and practice sessions
- First term exam
- Final examThe student needs to pass the final exam in order to pass the course.
- UoL examUoL exam is not included in the overall grade.
- Interim assessment (2 module)0.7 * First term exam + 0.15 * Homework + 0.15 * Participation in lectures and practice sessions
- Interim assessment (4 module)0.5 * Final exam + 0.2 * First term exam + 0.15 * Homework + 0.15 * Participation in lectures and practice sessions
- Brunnermeier, M. K. (2001). Asset Pricing under Asymmetric Information: Bubbles, Crashes, Technical Analysis, and Herding. Oxford University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.oxp.obooks.9780198296980
- Lo, A. W. (2010). Hedge Funds : An Analytic Perspective - Updated Edition (Vol. Rev. and expanded ed). Princeton: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=350096
- Financial markets and corporate strategy, Grinblatt, M., Titman, S., 2002
- Investments, Bodie, Z., Kane, A., 2005