30055 - FINANCIAL ECONOMICS
CLEAM - BESS-CLES - BIEMF - BIEF
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.
The exam is aimed at testing the overall knowledge of the student and includes questions that covers the different chapters. A typical format involves 5 short questions (2 points each) and 4 long questions (5 points each). There may be minor modifications to this depending on the quality of the questions. In-class participation will be evaluated by each teacher in an individual way, as communicated during classes. In-class participation is a bonus that is added to the grade (that may reach the maximum of 30) of the written paper. Non-programmable calculators may be required if the questions require computations, but are not allowed if the questions do not require any computation.
- Bodie, Kane,Marcus, Investments, Mc Graw Hill, tenth global edition, chapters 6, 7, 9, 10, 14, 15, 16