Course 2008-2009 a.y.

Course Objectives

students will gain a general knowledge about management of stock and bond portfolios. After a brief introduction on stock and bond markets, the course looks at the main tools for managing portfolios, like diversification across assets, models for determining expected returns, as well as tools which are specific to the bond market like duration and the term structure of interest rates. The efficient frontier will be used as a tool to compare risk and expected returns on optimal portfolios. In the final part the course will also introduce derivative assets and discuss their role as hedgers in a portfolio context.

Course Content Summary

• the basic theory of interest, introduction to fixed income
• duration, the term structure, spot and forward rates
• firm valuation
• mean variance portfolio theory, diversification effects, portfolio problems
• the general case of N risky assets, capital market line, investor demand and optimal portfolios
• the capital asset pricing model, security market line
• multifactor models, the arbitrage pricing theory
• the arbitrage pricing theory
• the dividend discount model
• forward, futures, swaps
• derivatives and portfolios

Detailed Description of Assessment Methods

Final written exam, no partial exam

Textbooks

• Bodi, Kane e Marcus, Investments, Mc Graw Hill, VII edition, 2008

Prerequisites

Mathematics, statistics and Excel.