30055 - FINANCIAL ECONOMICS
CLEAM - BESS-CLES - WBB - BIEF - BIEM - BIG
Course taught in English
Students 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 is used as a tool to compare risk and expected returns on optimal portfolios.
- The basic theory of interest, introduction to fixed income.
- Duration, the term structure, spot and forward rates.
- The expectations theory, management of bond portfolios.
- 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.
- Z. BODIE, A. KANE. A.J. MARCUS, Investments, Mc Graw Hill, 10th global edition:
- chapter 6 (capital allocation to risky assets);
- chapter 7 (optimal risky portfolios except the section on “optimal portfolios and non normal returns” and section 7.5 on risk pooling);
- chapter 9 (the capital asset pricing model);
- chapter 10 (APT and multifactor models except section on “APT and portfolio optimization in a single-index market”);
- chapter 14 (bond prices and yields);
- chapter 15 (the term structure);
- chapter 16 (managing bond portfolios).
- The presentations used during the lectures are available on your yoU@B.