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Efficient Market Hypothesis CT8 (v)
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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. CT8 (i)
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Portfolio Theory: Mean variance portfolio theory and its assumptions. CT8 (ii)
Models of Asset Return: Multifactor models, single index models, Capital Asset Pricing Model (CAPM), Arbitrage Pricing Model, Principle of No Arbitrage. CT8 (ii, iv, vi)
Discrete Financial Mathematics: Binomial tree model, derivative pricing, Cox-Ross-Rubinstein model, trinomial tree model, autoregressive models, Wilkie model. (T8 (vi, viii)
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Portfolio Optimisation: Stochastic control theory in the discrete setting, Martingale method in the discrete setting.
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Essential:
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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)
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John van der Hoek, Robert J. Elliott, Binomial Models in Finance, Springer, Berlin, 2006. (332.64/VAN)
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Yannick Malevergne, D. Sornette, Extreme Financial Risks: from Dependence to Risk Management, Springer, Berlin, 2006. (332.6015118/MAL)
Supplementary:
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Michael U. Dothan, Prices in Financial Markets, Oxford University Press, New York, 1990. (332.015192/DOT)
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John C. Hull, Options, Futures, and other Derivatives, 6th Edition, Pearson Prentice Hall, Upper Saddle River, 2006. (332.632/HUL)
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David G. Luenberger, Investment Science, Oxford University Press, New York, 1998. (332.6/LUE)
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Robert L. McDonald, Derivatives markets, Boston and London, Addison-Wesley, 2005. (332.6457/MCD)
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Giorgio Szego, Portfolio Theory with Application to Bank Asset Management, Academic Press, 1980.
Background:
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Peter L. Bernstein, Against the Gods: The Remarkable Story of Risk, John Wiley &Sons, New York, 1996. (368/BER)
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Peter L. Bernstein, Capital ideas: the improbable origins of modern Wall Street, Free Press - Maxwell Macmillan International, 1993. (332.632/BER)
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Roger Lowenstein, When Genius Failed: the Rise and Fall of Long-Term Capital Management, Random House, New York, 2000. (332.6/LOW)
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