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.

-Taleb, Nassim(2012). Antifragile: Things That Gain From Disorder. New York: Penguin Books.

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 this curricular unit considers the grades of the homework's and the final exam according to the below criteria. Before the criteria details some important remarks:

The criteria will apply to both, 1^st and 2^nd call examination period.
The criteria assumes that students will attend the exams physically in the University, which could have the classical paper format or through an online exam, this also done in the University facilities.
Final remark, in the case there is another lockdown or any special measures due to the Pandemic COVID-19 or other extraordinary event, which implies a contingency plan action and the need to change classes and exams all to online format, the criteria will suffer adjustments that will also be outlined in the first class of the semester.

Criteria of Final Grade, weighted average:

30% - Homework's (HWI- 15%, HWII- 15%);

70% - Exam, with a minimum of 7 points requirement, otherwise fail.

In addition to the minimum exam requirement, to be approved in the curricular unit, the final weighted average should be greater or equal than 10 points (scale from 1 to 20 points).

Note: Rounding procedure will only take place in the final weighted average number and not in the individual components of the evaluation!

Subject matter

LU1: Markets and conventions

Understanding financial markets organization
Foreign exchange market
Market efficiency
Exchanges versus over the counter (OTC)
Conventions

LU2: Equity Valuation

Financial ratios
Discount models

LU3: Introduction to fixed income instruments

Bonds
Duration and convexity
Yield curve
Hedging risk

LU4: Portfolio Management

Performance measures
Portfolio theory
CAPM
Multi-factor models
Active portfolio management

LU5: Introduction linear derivatives: futures and forwards

Differences between futures and forwards
Non arbitrage principle and cost of carry
Payoff diagrams

LU6: Introduction to Swaps

Interest Rate Swaps, Credit Default Swaps and Commodity Swaps

LU7: Introduction non-linear Derivatives: Vanilla options

Definition of calls and put
Basic concepts of valuation
Payoff and P/L diagrams
Options strategies

LU8: New Philosophies in Portfolio Management

LU9: Regulation

MiFID II
PRIIPs (KIDs)

Programs

Programs where the course is taught: