Mathematics of Portfolios
Undergraduate: Level 6
Monday 13 January 2020
Friday 20 March 2020
01 October 2019
Requisites for this module
BSC N233 Actuarial Science (Including Placement Year),
BSC N323 Actuarial Science,
BSC N324 Actuarial Science (Including Year Abroad),
BSC N325 Actuarial Science (Including Foundation Year),
BSC L1G2 Economics and Mathematics (Including Placement Year),
BSC LG11 Economics and Mathematics,
BSC LG18 Economics and Mathematics (Including Foundation Year),
BSC LG1C Economics and Mathematics (Including Year Abroad),
BSC GN13 Finance and Mathematics,
BSC GN15 Finance and Mathematics (Including Placement Year),
BSC GN18 Finance and Mathematics (Including Foundation Year),
BSC GN1H Finance and Mathematics (Including Year Abroad)
The module introduces modern financial economic theories and methods on portfolio management to construct asset models to assist risk management of financial services firms.
1. Utility Theory and Investment Risk
Utility function, expected utility theorem, measures of investment risk – variance of return, downside semi-variance of return, shortfall probabilities and Value-at-Risk (VAR) / Tail VaR.
2. Mean Variance Portfolio Theory
Short sales and portfolios of assets, diversification, the Markowitz model, the two-fund theorem, inclusion of a risk-free asset, the one-fund theorem.
3. The Capital Asset Pricing Model (CAPM)
Capital asset pricing model, betas and CAPM for portfolios, security market line, CAPM as a pricing formula, the Efficient Market Hypothesis (EMH)
4. Factor Models
Single factor models, multi-factor models, construction of the different types of multifactor models and perform calculations using both single and multi-factor models.
5. Arbitrage Pricing Theory
Simple APT, compatibility of APT with CAPM, More on compatibility of APT with CAPM, two-factor model, diversifying the portfolio, arbitrage pricing on the diversified portfolio
On completion of the module students should be able to:
- Describe and discuss the application of utility theory to economic and financial problems.
- Discuss the advantages and disadvantages of different measures of investment risk.
- Describe and discuss the assumptions of mean-variance portfolio theory and find mean-variance optimal portfolios.
- Describe and discuss the properties of single and multifactor models of asset returns.
- Describe asset pricing models, perform calculations and appreciate the limitations of the models studied.
No additional information available.
This module has 30 lectures and 5 classes in the autumn term. There are 3 revision hours in the summer term.
This module does not appear to have any essential texts. To see non-essential items, please refer to the module's reading list.
Assessment items, weightings and deadlines
|Coursework / exam
||120 minutes during Summer (Main Period) (Main)
Module supervisor and teaching staff
Dr Haslifah Hashim, email firstname.lastname@example.org
Dr Haslifah Hasim (email@example.com)
Dr Dimitrina Dimitrova
Cass Business School, City, University of London
Available via Moodle
Of 35 hours, 33 (94.3%) hours available to students:
2 hours not recorded due to service coverage or fault;
0 hours not recorded due to opt-out by lecturer(s).
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