Financial Investments - Module I: Portfolio Theory; Module Ii: Portfolio Management

The course aims to give an in-depth overview of modern portfolio theory and risk management in the context of portfolios of fixed-income securities and stocks. At the end of the course, students are expected to know: equilibrium in capital markets from a theoretical perspective; portfolio optimization and risk-return trade-off from an empirical perspective; techniques for measuring and managing risk.
The first module of the course (PORTFOLIO THEORY) examines risk-return trade-off, portfolio optimization, index models and the implications of modern portfolio theory for the equilibrium structure of expected rates of return on risky assets; the capital asset pricing model, multifactor descriptions of risk, the arbitrage pricing theory, the efficient market hypothesis, and principles of behavioral finance.
The second module of the course (PORTFOLIO MANAGEMENT) examines fixed-income security analysis, stock analysis, derivatives and portfolio performance evaluation. In particular, it focuses on bond prices and yields and the management of bond portfolios; equity valuation models and financial statement analysis; option, futures and other derivatives.

Instructional objectives that students are expected to achieve (first module - PORTFOLIO THEORY):
Equilibrium in capital markets, portfolio theory and practice: to understand theory and empirical evidence behind optimal risky portfolios; capital asset pricing models; arbitrage pricing models, single-index and multifactor models of risk and return.
The efficient market hypothesis, and the behavioral finance: to understand theory and empirical evidence behind well-functioning markets, irrational behaviors and bubbles.
Instructional objectives that students are expected to achieve (second module - PORTFOLIO MANAGEMENT):
Risk management in the context of fixed-income securities: to understand bond prices and yields, the term structure of interest rates, managing bond portfolios.
Risk management in the context of stock securities: to understand macroeconomic and industry analysis, equity valuation models, financial statement analysis.
Risk management in the context of derivatives: to understand the trading mechanics of option and futures contracts and their pricing.
Portfolio performance evaluation: to understand the reasons for the use of risk-adjusted indicators, to calculate and use them.