Portfolio and Risk Management Course

This course teaches you the concepts of risk and expected return. This course presents an overview of the basic concepts and techniques used to construct financial portfolios. You will learn about the investment process and get a very good understanding of economic, industry, and company analyses.

We will also look at understanding and interpreting major portfolio management and risk concepts. Through this course, you will discover the basic concepts of Modern Portfolio Theory. In the second half of the course we explore the frameworks to measure investment performance, as well as the various measures of investment performance. Finally, you will learn how to measure performance of equity, bonds and hedge funds. After completing this course, you will be able to appreciate the details that go into the creation of investment portfolios.

Course overview

Module 1

Principles of risk and risk management

Module 2

Practice of risk management

Module 1 introduces the principles and concepts of risk and risk management. It explores the history of risk management to help you gain an understanding of current drivers of enterprise risk management, as well as the development and impact of international standards.

Module 2 explores the impact of the global business environment on risk. It examines issues that are relevant to specific sectors and geographical areas, and the needs and demands of various stakeholder groups, including regulatory authorities.

Risk Management areas

• Strategic
• Operations
• Reporting
• Financial
• Health and safety

Risk management process per COSO guidelines

• Internal environment
• Objectives setting
• Event identification
• Risk assessment
• Risk response
• Control activities
• Information and communication
• Risk monitoring

Implementing controls in business cycles

• Controls

Learning Objectives

• Describe and calculate common measures of portfolio

• return and risk
• Discuss the derivation and use of the efficient frontier
• Describe and calculate the impacts of diversification on a
• given portfolio
• Define and distinguish between strategic and tactical
• asset allocation decisions
• Critique and identify risks associated with various
• investment strategies
• Describe issues related to portfolio execution and other
• trading costs
• Discuss methods and rules regarding monitoring and
• rebalancing
• Explain considerations specific to equity and fixed income
• portfolios, respectively
• Describe techniques to hedge unique risks
• Discuss how to assess portfolio performance and
• attribution

Outline

Introduction

• Why portfolio management
• Terminology
• Measures of risk and reward
• Diversification effects

Capital Market Concepts

• Two asset case
• Efficient frontier
• Capital market theory
• Market portfolio, capital asset line, capital market line
• Capital Asset Pricing Model

Asset Allocation Decision

• Strategic and tactical asset allocations
• Role of capital market expectation
• Beta and alpha
• Market and other risk factors
• Passive versus active management
• Investment strategies and mandates

Execution of Portfolio Decisions

• Types of markets
• Order types
• Costs of trading
• Trading execution decision and tactics
• Short selling

Equity Portfolio Considerations and Issues

• Approaches to equity valuation
• Equity risk premium
• Structuring an equity portfolio
• Use of indexes
• Indexing: strengths and weaknesses
• Strategy types
• Hedging and other risk management techniques
• Portfolio optimization
• International and currency issues

Fixed Income Portfolio Considerations and Issues

• Framework and process
• Managing portfolios versus an index
• Managing portfolios against liabilities
• Unconstrained funds
• Taxable versus non-taxable
• Fixed income strategies
• Fixed income risk exposures
• Hedging and risk management

Portfolio Monitoring and Rebalancing

• Monitoring market and economic changes
• Benefits and costs of rebalancing
• Rebalancing disciplines and trading rules

Performance Evaluation and Attribution

• Components of performance evaluation
• Statistical measures of performance
• Benchmarks
• Performance attribution
• Performance appraisal
• Manager selection

Summary and Questions