In line with the educational objectives of the Degree in Economia e Gestione Aziendale (CLEGA), the course has the objective of providing basic foundations for portfolio selection, real estate investments, and derivative contracts valuation.
At the end of the course students will have developed a solid knowledge of models and methods for portfolio selection, for the evaluation of real estate investments, for the evaluation of derivatives.
At the end of the course students will have developed a solid knowledge of models and methods for portfolio selection, for the evaluation of real estate investments, for the evaluation of derivatives.
teacher profile teaching materials
BOND PORTFOLIO
Theory of bond portfolios. Bond market structure. Semi-deterministic theories of immunization.
STOCK PORTFOLIO
Financial decision theory in conditions of uncertainty. The logic of choosing between risky alternatives. The theory of expected utility. Insurance contracts and utility theory.
The mean-variance analysis. The market and portfolio choices. The second-order characteristics of the portfolio. Average-variance optimization. The determination of averages and covariance. Diversification and risk measures.
The Capital Asset Pricing Model. General considerations on expectations and risk in efficient markets. CAPM as a model of balance. Measurement and estimation issues. Extensions and applications.
REAL ESTATE INVESTMENT
Real estate investments. Characteristics of the real estate market. Selection and management of real estate portfolios.
PART II:
DERIVATIVES
Forward contracts. Forward contracts and markets. The arbitrage relationship between spot and forward prices. Spot exchange and forward exchange.
Futures contracts. Features. Daily readjustment mechanism. Futures and spot prices. Hedging and speculation with futures contracts. Futures on stock indices and on bonds.
Financial options. The logic of the options. Call and put options. European and American options. Arbitrage restrictions for the option price. The binomial model. The risk-neutral evaluation. The evaluation of American options. More general options.
Programme
PART I:BOND PORTFOLIO
Theory of bond portfolios. Bond market structure. Semi-deterministic theories of immunization.
STOCK PORTFOLIO
Financial decision theory in conditions of uncertainty. The logic of choosing between risky alternatives. The theory of expected utility. Insurance contracts and utility theory.
The mean-variance analysis. The market and portfolio choices. The second-order characteristics of the portfolio. Average-variance optimization. The determination of averages and covariance. Diversification and risk measures.
The Capital Asset Pricing Model. General considerations on expectations and risk in efficient markets. CAPM as a model of balance. Measurement and estimation issues. Extensions and applications.
REAL ESTATE INVESTMENT
Real estate investments. Characteristics of the real estate market. Selection and management of real estate portfolios.
PART II:
DERIVATIVES
Forward contracts. Forward contracts and markets. The arbitrage relationship between spot and forward prices. Spot exchange and forward exchange.
Futures contracts. Features. Daily readjustment mechanism. Futures and spot prices. Hedging and speculation with futures contracts. Futures on stock indices and on bonds.
Financial options. The logic of the options. Call and put options. European and American options. Arbitrage restrictions for the option price. The binomial model. The risk-neutral evaluation. The evaluation of American options. More general options.
Core Documentation
Luenberger, D., Investment Science, OUP, 2013Reference Bibliography
Luenberger, D., Investment Science, OUP, 2013 Hull, J., Options, Futures and Other Derivatives, Pearson, 2017Type of delivery of the course
Lectures, classes (also in Computer Lab), and seminars given by practitioners from the financial industryAttendance
Attendance at lectures is not compulsoryType of evaluation
Written exam (one hour and half, two open-ended questions and one exercise) and oral exam N.B. ACCORDING TO THE RECTORAL DECREE 703/2020 (EMERGENCY COVID-19), UNTIL NEW PROVISIONS BY THE UNIVERSITY, THE EXAM WILL BE TAKEN ONLY IN ORAL FORM BY MICROSOFT TEAMS