The University of Southampton
Courses

MANG6142 Introduction to Portfolio Management and Exchange Traded Derivatives

Module Overview

The aim of this module is to provide a broad introduction to portfolio selection and derivatives from a theoretical and practical viewpoint. The course will show the interaction between asset management and derivatives.

Aims and Objectives

Module Aims

This module aims to provide you with a general introduction to modern portfolio theory and its relationship to investment management, and the nature and use of exchange rate and equity derivatives in hedging portfolio and security risk.

Learning Outcomes

Knowledge and Understanding

Having successfully completed this module, you will be able to demonstrate knowledge and understanding of:

  • The construction of portfolios or risky assets, the relationship between risk and return, and the nature and sources of risk in a stock market context;
  • the nature and use of derivative instruments for hedging portfolio and other risks.
Transferable and Generic Skills

Having successfully completed this module you will be able to:

  • critically analyse returns data for financial securities and make informed decisions about investment management;
  • develop presentation skills in the context of group presentations;
  • acquire team skills in the preparation of group material;
  • team work.
Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

  • analyse an equity portfolio in terms of risk and return;
  • evaluate the hedging requirements of a variety of investment management situations;
  • explain the role of exchange-funded derivative instruments in hedging financial risk;
  • use the CAPM, APT and other multi-factor models to analyse the risk and return properties of equity portfolios, together with their role in generating market anomalies and their relation to investment management strategies;
  • use stock market and interest rate futures and options’ derivatives for hedging and speculation, along with understanding the role of the Black-Scholes and binomial models in options’ valuations.

Syllabus

• Introduction to Finance and Portfolio Management, including risk and return in stock markets, security and portfolio analysis • Consumption and Investment • Capital Market Theory, including the CAPM, APT and other multi-factor models of risk and return • The nature and use of forwards, futures and options’ contracts, particularly in the context of stock market and exchange rate instruments • Arbitrage and hedging in theory and practice for futures • Options’ valuation approaches, especially the Black-Scholes and Binomial models, and their use in hedging strategies

Learning and Teaching

Teaching and learning methods

The module is taught over a period of six weeks. Each week consists of 3.5 hours plus of teaching. The teaching consists of 3 lectures per week plus one class involving case studies and numerical problem solving.

TypeHours
Independent Study126
Teaching24
Total study time150

Resources & Reading list

Elton, E.J., Gruber, M.J., Brown, S.J. and Goetzmann, W.N. Modern Portfolio Theory and Investment Analysis. 

Kolb, R. Futures, Options and Swaps. 

Hull, J. C.. Options, Futures and Other Derivatives. 

Copeland, T. E., Weston, J. F. and Shastri, K. Financial Theory and Corporate Policy. 

Assessment

Formative

Tutorial

Summative

MethodPercentage contribution
Examination  (2 hours) 70%
Group Assignment  (3000 words) 30%

Repeat

MethodPercentage contribution
Examination  (2 hours) 100%

Referral

MethodPercentage contribution
Examination  (2 hours) 100%
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