Investment and Portfolio Management

The concept and characteristics of financial investments, with particular emphasis on investment decisions (goals and restrictions of investors). The rate of return and risk of financial investment. Characteristics of financial markets (assets and market participants). Analysis and valuation of investments in debt and equity instruments. Investment efficiency and benchmarking. The concept and use of derivatives for risk management. During the classes all topics will be developed and supported by examples.

1. Introduction to investing theory. Goals and restrictions of investors.

- Definition and characteristics of financial investments

- Classification of financial assets

- Determinants of financial investments

- Securities and markets.

2 Criteria for investment decisions.

- Returns classification (nominal, real, risk free rate, risk premium)

- The concept of expected rate of return

- Return on investment distribution (normal distribution characteristics - kurtosis, skewness), Value-at-Risk

- Investment risk types and risk measures (variance, standard deviation)

- Risk diversification - classification (covariance and correlation rates of return).

3. Debt portfolio management.

- Classification and structure of interest rates (structure of immediate interest rates, term structure of interest rates)

- Theories regarding interest rate shaping (liquidity preferences, segmentation, expectations)

- Debt instrument features (price, profitability)

- Bond valuation model

- Bond sensitivity analysis to interest rate changes.

1.

4. Equity portfolio management.

- Types and features of equity instruments

- Systematic and unsystematic risk

- Beta coefficient

- Asset valuation models (Sharpe, Markowitz, CAPM single indicator model, CML capital market line and SML stock market line)

- The concept of capital market efficiency

- Assumptions and basics of technical and fundamental analysis, stock market indicators.

5. Traditional measures of financial investment effectiveness.

- Benchmark concept, tracking error

- Performance indicators (Sharp, Sortino, Jensen, Treynor).

2.

6. Portfolio Management

- Active vs Passive

- Private wealth management

7. Investment risk management using derivatives contracts.

- Forward / futures contracts characteristics

- Use of futures contracts to hedge risk.

- Use of swap contracts to hedge risk.

- Characteristics and use of options

- Withdrawal functions, rights and obligations of transaction parties.

Basic position:

Bodie, Kane, Marcus 2018, Essential of Investments, Mc Grow Hill Education

Supplementary literature:

Haugen R. A., Modern Investment Theory, Pearson 2000

Francis J. F., Investments: Analysis and Management, McGraw Hill Higher Education.

Blake D., Financial Market Analysis, Wiley & Sons, Ltd. 2000.

Understanding in a deeper degree theories and economic models concerning the financial investments and portfolio management.,

Using the theory of management and quality science discipline and complementary sciences (economics and finance) to identify, diagnose and solve problems related to financial decisions in the organisation and management of financial institutions, using an appropriate selection of sources and adapting existing or developing new methods.

Correctly interpreting complex technological, social, political, legal and economic processes and phenomena as well as their influence on financial decisions in organisations, the functioning of organisations and the whole economy, using appropriate sources.

80% examination score, 20% project