Risk and Portfolio Construction (ECFS871)

This unit deals with the identification, measurement and control of various risks within an investment management process. The emphasis is on gaining an in-depth qualitative understanding of the concepts. The sessions are partly treated as if the class group is an investment management firm's asset allocation committee. Emphasis is placed on the process that could be undertaken in a hypothetical firm. Discussion of the portfolio manager's mandate and how this affects the definition of portfolio risk leads to questions of the fundamental concepts of risk, sources of risk and the variety of control methods needed. Qualitative and quantitative control methods are examined. Portfolio construction techniques follow, with a focus on a wide range of optimisation techniques controlling these risks.

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:

  • Introduction to risk
  • Measurement and assessment
  • Resampling and Bootstrapping
  • Black-Litterman Methodology
  • Life Cycle Investing
  • Improving Monte Carlo simulations
  • Modelling investment returns
  • Analysing portfolios

Prerequisite units:

Lecturer:

Anthony Corr

Unit guide:

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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