Portfolio analysis

The course covers theories of pricing financial assets in well-developed capital markets. The foundation of these pricing theories is portfolio selection theory, which is used to derive so-called optimal securities portfolios, that is, how an investor should combine a large number of financial assets to achieve the best possible balance between return and risk. The portfolio selection models addressed include CAPM and APT, as well as their empirical counterparts, the Single-Index and Multi-Index models. The course also covers how financial institutions can protect (immunise) their securities portfolios against various types of risks, as well as techniques for evaluating portfolio management performance. These theories are given practical implementation during the course through a series of computer-based exercises where students learn to construct securities portfolios and evaluate portfolio management results. The course also includes writing an independent study on a current topic in financial economics.