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Regular version of the site
Bachelor 2020/2021

Investment Portfolio Management

Language: English
ECTS credits: 10

Course Syllabus


Pre-requisites Microeconomics, basic calculus and probability theory, linear algebra, Principles of banking and finance. Abstract Investment Management is a year-long course for 4th year students at ICEF. The course is taught in English. The External Programme of the London University offers an examination in this subject.
Learning Objectives

Learning Objectives

  • 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
Expected Learning Outcomes

Expected Learning Outcomes

  • 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
Course Contents

Course Contents

  • Financial markets and instruments
    Money 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 markets
    History 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 Strategies
    Historical mutual fund performance; Market efficiency and behavioral finance; Return based trading strategies; Performance of hedge funds; Statistical arbitrage.
  • Market Microstructure
    Types of markets; Limit Order Markets; Bid-ask bounce (Roll); Adverse selection (Glosten-Milgrom); Optimal insider trading (Kyle); Market microstructure and investment analysis.
  • Diversification
    Expected 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 immunization
    Bond math; Term structure of interest rates; Yield to maturity; Duration; Immunization of bond and equity portfolios.
  • Risk and performance measurement
    Types of risk; Risk decomposition; Value-at-risk (VaR); Risk-adjusted performance measures; Performance measurement with changing portfolios (market timing).
  • Risk management
    Risk capital allocation; Put option protection; Portfolio insurance with calls; Nonlinear payoffs; Extreme risk; Hedging volatility; Hedging credit risk.
Assessment Elements

Assessment Elements

  • non-blocking Homework
  • non-blocking Participation in lectures and practice sessions
  • non-blocking First term exam
  • blocking Final exam
    The student needs to pass the final exam in order to pass the course.
  • non-blocking UoL exam
    UoL exam is not included in the overall grade.
Interim Assessment

Interim Assessment

  • 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


Recommended Core Bibliography

  • 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

Recommended Additional Bibliography

  • Financial markets and corporate strategy, Grinblatt, M., 2002
  • Investments, Bodie, Z., 2005