Portfolio Management

Course Code: 
Specialization Courses
A. International Economics and Finance

Type of course: Compulsory for Specialization: International economics and finance

Number of credits allocated: 6 ECTS Credits

Objective of the course 

The course begins with an introduction to government bond valuation including: yield conventions, spot/forward rates, the term structure of interest rates, Duration, Macauley/modified/effective Duration, convexity and the basic aspects of bond portfolio management, such as dedication, immunization, horizon matching, portfolio insurance and hedging.

Then it covers the utility theory given uncertainty. It provides the axioms of choice under uncertainty, the common utility functions, their properties, the notion of risk aversion and risk premium, and the 1st and 2nd stochastic dominance criteria.

Next, it provides the single measures of risk and return for a single asset and then complicates the discussion by moving to risk and return for a portfolio of many assets. Alternative risk measures and models are provided, and the Capital Asset Pricing Model (CAPM) as well as the Arbitrage Pricing Model (APT) are analyzed. In the last part, it moves to the pricing of European-style contingent claims in a single-period model. The Black-Scholes model is derived assuming a lognormal distribution for the asset. Then, it analyzes the pricing of forwards and future contracts on assets and derivatives, and the pricing and use of swaps.  Finally, describes the hedging techniques of portfolios using derivatives.

Course contents

The following list provides the areas that will be covered within the course:

  1. Bond Valuation
  2. Management of bond portfolios
  3. The term structure of interest rates
  4. Utility theory, risk aversion
  5. Stochastic dominance
  6. Risk and return, investments under uncertainty
  7. Mean-variance efficient portfolios, the Markowitz model
  8. Alternative risk measure
  9. Capital Asset Pricing Model
  10. Derivative products
  11. Portfolio management using derivatives.

Recommended reading

  • Τζαβαλής, Πετραλιάς, Επενδύσεις, Εκδόσεις ΟΠΑ, 2011.
  • T. Copeland, J. Weston, and Κ. Shastri, 2005, Financial Theory and Corporate Policy, Addison-Wesley Publishing Company.
  • Z. Bodie, A. Kane, and A.J. Marcus, 2009, Investments, McGraw-Hill, 7th

Teaching methods: Lectures

Assessment methods: Midterm Exam (40%), Exercises (15%), Final Exam (45%).

Language of instruction: Greek