Portfolio Theory & Risk Management (Online Version) - MAT00033M

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Module will run

Occurrence	Teaching period
A1	Semester 1 2025-26
A2	Semester 1 2025-26 to Semester 2 2025-26
B1	Semester 2 2025-26
B2	Semester 2 2025-26 to Semester 1 2026-27

Module aims

Students are expected to acquire the skills and knowledge necessary to apply modern risk measures and management tools and to use portfolio theory to manage and balance investment risk and return. The main emphasis here is on employing the concept of diversification for management of stock investment. A more general approach involves utility functions and the construction of portfolios using expected utility optimisation. Portfolios of various derivative securities are powerful tools for risk management. Sophisticated needs of fund managers can be addressed by designing these portfolios. Students also need to demonstrate familiarity with pricing models along with their strengths and disadvantages.

Module learning outcomes

By the end of this module students should

• recognize methods of measuring risk, understand the relationships between them and their relevance for particular applications;
• understand the concept of diversification and be able to employ it to design and manage a portfolio of stocks;
• understand the theoretical background of optimization schemes and be able to implement them to solve practical investment problems;
• understand the advantages and disadvantages of Value at Risk (VaR), a widely accepted measure of risk; be able to compute VaR in practical applications;
• be able to design a portfolio of financial instruments to meet the needs of managers concerned with risk management (in particular hedging risk).

Indicative assessment

Task	% of module mark
Coursework - extensions not feasible/practicable	100
Oral presentation/seminar/exam	0

Special assessment rules

None

Indicative reassessment

Task	% of module mark
Coursework - extensions not feasible/practicable	100
Oral presentation/seminar/exam	0

Module feedback

Information currently unavailable

Indicative reading

1. M.J. Capinski and E. Kopp, Portfolio Theory and Risk Management, Cambridge University Press 2014 (to appear).
2. M. Capinski and T. Zastawniak, Mathematics for Finance: An Introduction to Financial Engineering, 2nd edition, Springer 2011.
3. D.G. Luenberger, Investment Science, Oxford University Press 1998.
4. E. Elton, M. Gruber, S. Brown, W. Goetzmann: Modern Portfolio Theory and Investment Analysis, 7th Edition Wiley 2007.