This course will provide an overview of the challenges and opportunities provided in the European and the US financial markets. There will be a review of interest rate theory, the pricing of bonds and derivatives and their use in selecting optimal portfolios. Examples of financial instruments used in portfolio management and financial market efficiency will be discussed as part of the course. Use of the capital asset pricing model (CAPM) in both the standard and non-standard forms for pricing stocks will be demonstrated and multi-factor models including the arbitrage pricing model will be presented. The practical use of derivatives, such as, options, futures, and swaps will be described. Practical applications of over-the-counter products, such as, credit derivatives are demonstrated. Evaluation of portfolio performance will be described by use of simple Sharpe, Treynor, and Jensen indices and more advanced asset allocation and evaluation tools. Upon completion of the course the student should be able to: compute portfolio mean returns, variances and covariances with and without the use of linear algebra estimate mean, variance, covariance, beta and multi-factor betas based on historical returns understand alternative risk measures characterize the efficient frontier under restrictions on short sale and borrowing work with measures of risk aversion, portfolio choice and other decisions within the framework of expected utility understand and work with models of expected returns define, compute, work with and understand the limitations of performance measures decompose performance understand the different tests of the main asset pricing models understand limit-to-arbitrage problems and related trading strategies explain the major findings regarding investor behavior and related trading strategies set up central problems in Excel, including numerical optimization and linear regression interpret optimization and regression results from Excel explain institutional setup of the financial markets characterize the relevant features of stocks, bonds and derivatives define and work with bond yields and with duration and convexity understand and work with the term structure of interest rates and forward rates understand the structure, usage and valuation of derivatives Contents The topics we will explore include the following: the basics of risk and return the investment process and the importance of asset allocation how markets operate portfolio theory and how to form optimal portfolios equilibrium models of security prices security price anomalies such as the size, book-to-market, and momentum effects in stock returns the behavioral approach to finance and its role in understanding price anomalies performance evaluation of mutual funds and hedge funds the role of fixed income securities in the portfolio the term structure of interest rates the use and valuation of derivatives
bodie investments and portfolio management 9th pdf.rar | updated
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