Course ObjectiveThis course offers a comprehensive introduction to the world of
investments. The course is structured in four broad parts, covering
fundamental areas of investments: Part 1. Portfolio theory and asset
pricing; Part 2. Empirical evidence on security returns and portfolio
management; Part 3. Fixed-income securities; Part 4. Options, futures
and other derivatives. All four parts of the course are closely knitted
to the learning goals of Academic and Research Skills and Bridging
Theory and Practice.
By the end of the course you should be able to:
- compute fundamental risk-management techniques: Value-at-Risk and
- apply the Markowitz portfolio selection model and construct an
efficient frontier of risky assets;
- compare the Capital Asset Pricing Model (CAPM) against the Arbitrage
Pricing Theory. Test the predictions of the CAPM;
- price fixed income securities and construct the Term Structure of
- solve portfolio immunization problems by matching the duration of
assets and liabilities;
- build a binomial tree and apply the Black-Scholes formula.
Course ContentInvestment decisions take a prominent role in everyday life. We can
think of investment decisions taken by institutional investors (banks,
insurance companies, pension funds, mutual funds), but also of financial
decisions taken by individual households (additional pension savings,
savings for children education, buying a house, etc.). Investment theory
is also strongly linked to risk management. The importance of sound
decision making in this field has been underlined by recent experiences
on financial markets, law suits involving complex financial products for
retail clients, etc. The key objective of this course is to provide
understanding of the pricing of different asset classes and insights
into the principles of investment analysis. A framework is developed
that allows one to address a variety of (at first sight) completely
different investment problems in a unified way.
Method of AssessmentWritten exam – individual assessment.
(Interim) Assignment(s) – group assessment.
Entry RequirementsFinance I or equivalent.
LiteratureZvi Bodie, Alex Kane and Alan J. Marcus: Investments, McGraw Hill (10th
Additional readings might be announced on Canvas.
(Literature has been adjusted at 26-03-2018)
Additional InformationThis course provides the knowledge basis for students aiming at an MSc
in Finance and a career in the financial sector.
Recommended background knowledgeThe course relies on prior knowledge on linear algebra and statistics
(QRM I, QRM II, and QRM III). Even though it offers a very brief
introduction to the concepts and tools in this area that we will
primarily use, students are strongly advised to review this material
from relevant courses in the first two years of studies. I will further
assume that students have a good understanding of the material covered
in Finance I, Finance II, and Financial Markets and Institutions.
Students are also recommended to refresh their basic Excel and STATA
skills, as weekly empirical assignments constitute an important part of
|Language of Tuition||English|
|Faculty||School of Business and Economics|
|Course Coordinator||dr. T.C. Dyakov|
|Examiner||dr. T.C. Dyakov|
You need to register for this course yourself
Last-minute registration is available for this course.
|Teaching Methods||Seminar, Lecture|
This course is also available as: