Investments & Asset Pricing

Catalog description

This course covers equities, fixed income, and derivative securities. Coverage includes market structure and mechanics as well as valuation and investment strategies for these securities from the perspective of both individuals and institutions. The course discusses variance and covariance risk in returns, develops the relation between risk and expected return, and the capital asset pricing model. Drawing on portfolio theory, students will construct the efficient frontier for a portfolio of stocks and evaluate the portfolio’s performance. Portfolio management including risk determination, factor models, and estimation of alpha and betas using regression analysis along with statistical significance determination will be covered. Students will learn quantitative techniques to measure and communicate the investment style of a fund and to estimate the risk characteristics of a bond (including duration and convexity) and its impact on portfolio management. Effective hedging strategies for stocks using derivative securities will be covered as well. Students will learn to simulate the stochastic price process of a stock and dynamically adjust their delta hedge. Concepts will be reinforced using hands-on projects.