Introduction to Portfolio Management and Exchange Traded Derivatives

Learning Outcomes

Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

• evaluate the hedging requirements of a variety of investment management situations;
• use the single-index model and other 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;
• explain the role of exchange-funded derivative instruments in hedging financial risk;
• use stock market futures and options’ derivatives for hedging and speculation, along with understanding the role of the binomial models in options’ valuations.
• analyse an equity portfolio in terms of risk and return;

Knowledge and Understanding

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

• the nature and use of derivative instruments for hedging portfolio and other risks.
• 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;

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;

• Introduction to Finance and Portfolio Management, including risk and return in stock markets, security and portfolio analysis
• Consumption and Investment
• Capital Market Theory, including thesingle index model and other factormodels of risk and return
• The nature and use of forwards, futures and options’ contracts, particularly in the context of stock market instruments
• Arbitrage and hedging in theory and practice for futures
• Options’ valuation approaches, especially the Binomial model, and their use in hedging strategies

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.

Resources & Reading list

Textbooks

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

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

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

Kolb, R. Futures, Options and Swaps. Blackwell.

Formative

This is how we’ll give you feedback as you are learning. It is not a formal test or exam.

Summative

This is how we’ll formally assess what you have learned in this module.

Referral

This is how we’ll assess you if you don’t meet the criteria to pass this module.

Repeat

An internal repeat is where you take all of your modules again, including any you passed. An external repeat is where you only re-take the modules you failed.

Repeat Information

Repeat type: Internal & External