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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, portfolio theory and derivative instruments. A hands-on approach is used with case studies and illustrative exercises.

General characterization

Code

200160

Credits

7.5

Responsible teacher

Luís Alberto Ferreira de Oliveira

Hours

Weekly - Available soon

Total - Available soon

Teaching language

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

Prerequisites

The course requires some preliminary knowledge, such as basic financial calculus and basic financial quantitative backgrounds (markets, instruments, net present value and compounding, ¿), advance knowledge of excel and basics in the financial market¿s conventions.

Bibliography

Bodie, Z., A. Kane, and A. Marcus, ¿Investments¿, McGraw-Hill, 10th edition, 2020.

Hull, J., ¿Options, Futures and Other Derivatives¿, Pearson, 10th edition, 2017.

Fabozzi, F. ¿Fixed Income Analysis¿, Wiley 2nd edition, 2007.

Elton, E., M. Gruber, S. Brown, W. Goetzmann, ¿Modern Portfolio Theory and Investment Analysis¿, 9thedition, 2014.

Oliveira, L., L. Laureano, P. Inácio. Mercados e Instrumentos Financeiros: Fundamentos dos mercados e dos ativos financeiros, Sílabo, 1st edition, 2019.

Teaching method

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

Evaluation method

The final grade of this curricular unit considers the final exam according to the below criteria. Before the criteria details some important remarks:

The criteria will apply to both, 1st and 2nd 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 be outlined.

The minimum exam requirement to be approved in the curricular unit should be greater or equal than 10 points (scale from 1 to 20 points).

Subject matter

LU1: Introduction, markets and conventions

Understanding financial markets organization

Capital markets, interbank money market and the foreign exchange market

Exchanges versus over the counter (OTC)

Basic conventions

LU2: Fixed income instruments

Bonds: The general valuation model

Yield curve and its representations

Bootstrapping: simple way to infer the term structure of interest rates

Return measures: yield to maturity and the internal rate of return

Interest rate risk: Duration and convexity

Floating rate notes: cash flows, credit risk and indexation, and valuation

LU3: Stock valuation

Dividend discount model

Relative Valuation: PER and PBV

LU4: Portfolio Management

Portfolio theory: the Markowitz model

Riskless assets: the global efficient frontier

CAPM: estimating the model parameters ¿ SIM and MM

Performance measurement

Multifactor models

LU5: Introduction linear derivatives: futures and forwards

Linear derivatives: futures and forwards

Non-linear derivatives: options