Registry
Module Specifications
Archived Version 2007 - 2008
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Module Aims | |||||||||||||||||||||||||||||||||
1. To provide students with the knowledge of utility theory sufficient for analysis and solution of basic investment problems. 2. To ensure that students have clear understanding of the mean-variance portfolio theory. 3. To introduce students to the capital asset pricing model, and the arbitrage pricing theory. | |||||||||||||||||||||||||||||||||
Learning Outcomes | |||||||||||||||||||||||||||||||||
On completion of this model students should be able to: 1. Use the utility theory for making optimal investment decisions. 2. Derive efficient frontiers and find optimal portfolios within the mean-variance portfolio. 3. Derive equilibrium relationships for expected rates of return. | |||||||||||||||||||||||||||||||||
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NOTE | |||||||||||||||||||||||||||||||||
Assume that a 7.5 credit module load represents approximately 112.5 hours' work, which includes all teaching, in-course assignments, laboratory work or other specialised training and an estimated private learning time associated with the module. | |||||||||||||||||||||||||||||||||
Indicative Syllabus | |||||||||||||||||||||||||||||||||
· Efficient Market Hypothesis · Risk Measures: Define some possible measures of investment risk such as variance of returns, semi-variance of returns, and value at risk. Coherent risk measures and alternatives. · Portfolio Theory: mean variance portfolio theory and its assumptions. · Models of Asset Return: Multifactor models, single index models, Capital Asset Pricing Model (CAPM), Arbitrage Pricing Model, Principle of No Arbitrage. · Discrete Financial Mathematics: Binomial tree model, derivative pricing, Cox-Ross-Rubinstein model, trinomial tree model, autoregressive models, Wilkie model. · Portfolio Optimisation: Stochastic control theory in the discrete setting, Martingale method in the discrete setting. | |||||||||||||||||||||||||||||||||
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Indicative Reading List | |||||||||||||||||||||||||||||||||
Essential: · Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann, Modern Portfolio Theory and Investment Analysis, 7th edition, John Wiley & Sons, New York, 2007. (332.6/ELT) · John C. Hull, Options, Futures, and other Derivatives, 6th Edition, Pearson Prentice Hall, Upper Saddle River, 2006. (332.632/HUL) · Yannick Malevergne, D. Sornette, Extreme Financial Risks: from Dependence to Risk Management, Springer, Berlin, 2006. (332.6015118/MAL) Supplementary: · Michael U. Dothan, Prices in Financial Markets, Oxford University Press, New York, 1990. (332.015192/DOT) · David G. Luenberger, Investment Science, Oxford University Press, New York, 1998. (332.6/LUE) · Robert L. McDonald, Derivatives markets, Boston and London, Addison-Wesley, 2005. · Giorgio Szego, Portfolio Theory with Application to Bank Asset Management, Academic Press, 1980. Background: · Peter L. Bernstein, Against the Gods: The Remarkable Story of Risk, John Wiley & Sons, New York, 1996. (368/BER) · Peter L. Bernstein, Capital ideas: the improbable origins of modern Wall Street, Free Press - Maxwell Macmillan International, 1993. (332.632/BER) · Roger Lowenstein, When Genius Failed: the Rise and Fall of Long-Term Capital Management, Random House, New York, 2000. (332.6/LOW) | |||||||||||||||||||||||||||||||||
Programme or List of Programmes | |||||||||||||||||||||||||||||||||
BSSA | Study Abroad (DCU Business School) | ||||||||||||||||||||||||||||||||
BSSAO | Study Abroad (DCU Business School) | ||||||||||||||||||||||||||||||||
ECSA | Study Abroad (Engineering & Computing) | ||||||||||||||||||||||||||||||||
ECSAO | Study Abroad (Engineering & Computing) | ||||||||||||||||||||||||||||||||
FM | BSc in Financial & Actuarial Mathematics | ||||||||||||||||||||||||||||||||
HMSA | Study Abroad (Humanities & Soc Science) | ||||||||||||||||||||||||||||||||
HMSAO | Study Abroad (Humanities & Soc Science) | ||||||||||||||||||||||||||||||||
MS | BSc in Mathematical Sciences | ||||||||||||||||||||||||||||||||
SHSA | Study Abroad (Science & Health) | ||||||||||||||||||||||||||||||||
SHSAO | Study Abroad (Science & Health) | ||||||||||||||||||||||||||||||||
SMPSC | Single Module Professional Science | ||||||||||||||||||||||||||||||||
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