Risk and Portfolio Construction (ECFS871)

This unit deals with the key issues relating to the building of institutional portfolios. Students will learn how to identify, measure and control various risks within a portfolio. Building on this knowledge the unit examines practical and theoretical aspects in the application of Modern Portfolio Theory (MPT) to the real world. Several extensions of MPT and alternative portfolio construction approaches are also examined. Emphasis is placed on the impact that errors in inputs and incorrect assumptions have on portfolio outcomes. Teaching uses a mixture of lectures and hands-on spreadsheets to illustrate the ideas.

Learning Outcomes:

  1. Identify and measure the various sources of institutional portfolio risks.
  2. Distinguish the key attributes of alternative portfolio construction techniques, including their appropriate applications and limitations.
  3. Understand, apply and interpret strategies to control portfolio risks, including their appropriate applications and limitations.
  4. Construct and effectively manage an institutional portfolio.
  5. Apply appropriate alternative portfolio construction and risk control techniques to ‘real world’ situations, especially life cycle investing.

Topics:

  1. Introduction to Risk
  2. Measurement and Assessment
  3. Resampling and Bootstrapping
  4. Black-Litterman Methodology
  5. Life Cycle Investing
  6. Improving Monte Carlo Simulations
  7. Modelling Investment Returns
  8. Analysing Portfolios

Prerequisite Units:

Lecturers:

Unit Guides:

  • Risk and Portfolio Construction - The link will provide a list of guides for this unit. If the desired term/location is not listed, please view the latest one available.

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