PORTFOLIO SELECTION AND RISK MANAGEMENT
1.0 COURSE OVERVIEW
When an investor is faced with a portfolio choice problem, the number of possible assets and the various combinations and proportions in which each can be held can seem overwhelming. In this course, you’ll learn the basic principles underlying optimal portfolio construction, diversification, and risk management.
You’ll start by acquiring the tools to characterize an investor’s risk and return trade-off.
You will next analyze how a portfolio choice problem can be structured and learn how to solve for and implement the optimal portfolio solution.
Finally, you will learn about the main pricing models for equilibrium asset prices.
2.0 COURSE OBJECTIVES
Learners will:
- Develop risk and return measures for portfolio of assets
- Understand the main insights from modern portfolio theory based on diversification
- Describe and identify efficient portfolios that manage risk effectively
- Solve for portfolio with the best risk-return trade-offs
- Understand how risk preference drive optimal asset allocation decisions
- Describe and use equilibrium asset pricing models.
3.0 COURSE OUTLINE
General Introduction and Key Concepts
In this course you will first be presented with a few mistakes you will no longer make after following this course. In order to avoid making these mistakes, you will start by gaining a foundation and understanding of the three main types of information we need in order to build optimal portfolios: expected returns, risk and dependence.
Modern Portfolio Theory and Beyond
The focus is on Modern Portfolio Theory. By understanding how imperfect correlations between asset returns can lead to superior risk-adjusted portfolio returns, we will soon be looking for ways to maximize the effect of diversification, which is at the heart of Modern Portfolio Theory. But we won’t stop there: we will also explore the implications of Modern Portfolio Theory on real-world investment decisions and whether or not these implications are followed by investors. Finally, we will see how Modern Portfolio Theory can be built upon to derive the most popular asset pricing model: the Capital Asset Pricing Model.
Asset Allocation
This is dedicated to asset allocation. After a short introduction to investor profiling, we will delve into Strategic Asset Allocation (SAA). You will see how it relates to Modern Portfolio Theory and how it differs from Tactical Asset Allocation (TAA). We will look at how both asset allocations can be implemented separately but also in conjunction in order to build portfolios that fulfill investors’ needs and constraints while taking advantage of market opportunities.
Risk Management
This is dedicated to risk. We will start by looking in more depth at different sources of risk such as illiquidity and currency risk but also at the different tools available to investors to perform risk management. But how should we measure risk? We will see that it may be valuable to go a step beyond standard deviation, the risk measure we used so far, and look at the Value-at-Risk and Expected Shortfall which focus on potential large losses. Finally, we will use the financial instruments at our disposal to hedge market and currency risk.
FOR MORE DETAILS AND COURSE OUTLINE PLEASE CONTACT:
PIERRE DUPLIS BRENNER
The Admission Director
AFRICA INSTITUTE FOR CAPACITY DEVELOPMENT (AICD)
HEAD OFFICE:
21 Detroit Plaza |Pretoria Road|Kempton Park|
Gauteng. SOUTH AFRICA
Telephone : +27 733797377
Whatsapp Number : +27733797377
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