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Investments and Portfolio Management

Objectives

The course covers topics related to financial investments and portfolio management, including the organization and functioning of financial markets (money market, capital market, FOREX, derivatives,...), the fundamentals of fixed income instruments, equity valuation, derivative instruments, portfolio theory, asset pricing theory, the risk-return trade-off, market efficiency, measuring risk-adjusted performance, performance attribution and decomposition: asset selection and asset allocation, International diversification, multi-factor models and active portfolio management. A hands-on approach is used with real case studies and exercises.

General characterization

Code

200160

Credits

7.5

Responsible teacher

Luís Vasco Lourenço Pinheiro

Hours

Weekly - Available soon

Total - Available soon

Teaching language

Portuguese. If there are Erasmus students, classes will be taught in English

Prerequisites

Mathematical and quantitative backgrounds, advance knowledge of excel and interest in the financial markets.

Bibliography

-Bodie, Z., A. Kane and A. Marcus (1999). Investments. 4th Edition. New York: Irwin McGraw-Hill.

-Hull, John (2000).Options, Futures and Other Derivatives. 4th Edition. New York: Prentice Hall.

Teaching method

Theory and practice will be part of the course. Some practical examples are taught in class, but others will be provided through homeworks.

Evaluation method

The final grade of the course will take into account all the homeworks and one exam. Students are encouraged to participate during classes and to read documentation listed in the bibliography of the course. The slides used in the classes are just a summary and should be seen as guideline for more depth learning of the subjects lectured in the course.

Subject matter

1. Markets and conventions

- Understanding financial markets organization

-Foreign exchange market

- Market efficiency

- Exchanges versus over the counter (OTC)

- Conventions

2. Equity Valuation

-Financial ratios

-Discount Models

3. Introduction to fixed income instruments

-Bonds

-Duration and convexity

-Yield curve

-Hedging risk

4. Portfolio Management

-Performance measures

-Portfolio theory

-CAPM

-Multi-factor Models

-Active Portfolio Management

5. Introduction linear derivatives: futures and forwards

-Differences between futures and forwards

-Non arbitrage principle and cost of carry

-Payoff diagrams
6. Introduction to Swaps

- ‘Interest Rate Swaps’, ‘Credit Default Swaps’ and ‘Commodity Swaps’

7. Introduction non-linear Derivatives:  Vanilla options

- Definition of calls and put

- Basic concepts of valuation

- Payoff and P/L diagrams

- Options strategies