5610807: C21_Portfolio Management (VT IFS)

Qualifications

• • know the basic asset classes and their respective financial instruments.
  • Know the difference between strategical and tactical asset allocation.
  • list the requirements and repeat the basic concepts of Mean-Variance Theory.
  • know the difference between Sharpe-Ratio and Information-Ratio
  • list the requirements and how to derive the Capital Asset Pricing Model (CAPM).
  • Know how to extend the Single-index-Model to Multi-Factor Models.
  • know the concepts of Arbitrage and how to derive the resulting model of Arbitrage Pricing Theory (APT).
  • understand the basic financial instruments and their pricing.
  • describe the optimal investment process.
  • understand portfolio statistics and underlying statistical concepts.
  • explain the difference between risky and risk-free assets.
  • describe the outcomes of portfolio theory in a risk-return diagram.
  • understand the concept of risk, its decomposition into unsystematic and systematic risk, and the effects of (naïve) diversification.
  • understand the concept of beta in the Single-Index Model.
  • understand the concept of beta and the market risk-premium in context of the Capital Asset Pricing Model.
  • understand the concept of beta and factor portfolios in the Multi-Factor-Model.
  • understand the concept of arbitrage.
  • understand why APT is a much more general concept of market equilibrium than CAPM.
  • understand the working and pricing of fixed income securities.
  • understand the term structure of interest rates and their influence on the prices of fixed income securities.
  • understand the implications of the Efficient Markets Hypothesis on financial markets.
  • calculate the risk and return of financial instruments based on observable market values.
  • calculate the Minimum-Variance-Portfolio.
  • calculate the optimal risky portfolio.
  • calculate the idiosyncratic and the market-specific risk of a portfolio.
  • calculate an optimal portfolio in the context of Single-Index-Models.
  • calculate the Security Market Line in the CAPM and derive arbitrage opportunities thereon.
  • calculate bond yields, duration and other measures of fixed income securities and fixed income portfolios.
  • know how to design an event study to test and identify flaws of the Efficient Market Hypothesis.
  • perform financial statement analysis.
  • estimate Index-Models, and how to derive an optimal portfolio in this context.
  • analyze financial instruments in the common context of Mean-Variance Theory.
  • understand the Two-Fund Separation Theorem and derive the Capital Market Line.
  • find arbitrage opportunities.
  • relate different concepts of market equilibrium.
  • identify and exploit arbitrage opportunities.
  • identify the efficiency of financial markets.
  • combine different assets in an optimal portfolio.
  • relate the concept of the risk-return tradeoff to the optimal allocation of assets.
  • relate the concept of the Efficient Market Theory to observed market conditions.
  • evaluate the different models in the context of changing market conditions.
  • decide upon investment opportunities by evaluating any type of equity and fixed income securities.
  • evaluate equity and fixed income instruments.
  • evaluate optimal allocations of assets in the Markowitz context.
• • know the requirements for the basic models of portfolio optimization and market equilibrium theory.
  • understand the implications and flaws of these models.
  • apply these models in changing market conditions.
  • find and use the model needed in a specific situation/setting.
  • apply the models in individual assignments and in a group business game.
  • evaluate outcomes and discuss them critically.
  • understand the applicability and validity of the different models.
  • evaluate models and decide upon which of the models fits their needs best.
• • understand and critically discuss the arguments of fellow students.
  • work together in small groups to solve assignments and small examples discussed in class.
  • evaluate the solutions of fellow students; explain carefully why they might be right or wrong.
  • understand the flaws and problems of fellow students, reaction without offense.
  • react to other opinions and defend their solution without being offended.
• • listen carefully, read and repeat, practice until they understand the logic and mathematics behind models.
  • work together and motivate students who tend to give up as a reaction to the difficulty of mathematical problems.
  • take responsibility and organize/explain solutions to others who have problems and tend to give up.
• • learn how to use Excel to analyze financial markets
  • apply the software to optimize portfolios in a professional and real-world setting