Applied Portfolio Management

This course is an introduction to several important topics in portfolio management:

1) The term structure of interest and the estimation of zero-coupon curves. You will learn how to estimate the term structure parameters of the Cox-Ingersoll-Ross modeland to use the estimated parameters in hedging.

2) Corporate bonds. We will apply the Merton formula to the valuation of risky bonds, and use the implied asset volatility to hedge equity with debt.

3) Portfolio and consumption optimization when the individual has outside positions and a finite life. We will learn how to solve the agent’s optimization problem recursively.

4) Valuation of companies will focus on how to write a professional research report; we will use research from the investment bank community as a source of inspiration.

To ensure that the focus of the course is on the applicability of these issues, the dominant part of the course will be devoted to laboratory exercises and case studies.