In module two, you will learn about the classical portfolio theory of Markowitz, the capital asset pricing model and recent developments of these theories. We will investigate quantitative risk and return, looking at econometric models such as the ARCH framework and risk management metrics such as VaR and how they are used in the industry.
Sections
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Portfolio Management
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- Measuring risk and return
- Benefits of diversification
- Modern Portfolio Theory and the Capital Asset Pricing Model
- The efficient frontier
- Optimizing your portfolio
- How to analyze portfolio performance
- Alphas and Betas
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Fundamentals of Optimization and Application to Portfolio Selection
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- Fundamentals of portfolio optimization
- Formulation of optimization problems
- Solving unconstrained problems using calculus
- Kuhn-Tucker conditions
- Derivation of CAPM
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Value at Risk and Expected Shortfall
Accordion Content
- Measuring Risk
- VaR and Stressed VaR
- Expected Shortfall and Liquidity Horizons
- Correlation Everywhere
- Frontiers: Extreme Value Theory
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Asset Returns: Key, Empirical Stylised Facts
Accordion Content
- Volatility clustering: the concept and the evidence
- Properties of daily asset returns
- Properties of high-frequency returns
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Volatility Models: The ARCH Framework
Accordion Content
- Why ARCH models are popular?
- The original GARCH model
- What makes a model an ARCH model?
- Asymmetric ARCH models
- Econometric methods
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Risk Regulation and Basel III
Accordion Content
- Definition of capital
- Evolution of Basel
- Basel III and market risk
- Key provisions
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Collateral and Margins
Accordion Content
- Expected Exposure (EE) profiles for various types of instruments
- Types of Collateral
- Calculation Initial and Variation Margins
- Minimum transfer amount (MTA)
- ISDA / CSA documentation
Building Blocks of Quantitative Finance
