Learning outcomes

The objective of the course is to analyse quantitative tools and methodologies in order to build robust and efficient portfolios of financial assets. Starting from Markowitz’s Modern Portfolio Theory, the course deals with the pitfalls of traditional optimization procedure and suggests alternative models such as constrained optimization, resampling and the Black&Litterman approach.
The strategic asset allocation is the first step of the investment process. The second step is the definition of the investor’s risk profile and the choice of the most appropriate managers’ selection model. Finally, the management of the tactical allocation phase requires the adoption of performance, performance attribution and risk-adjusted performance techniques.

Program

The topics of the course are:
- An introduction to the investment process: beliefs, risks and the rules of the game
- The global framework: Strategic, tactical and risk allocation
- The “math tools”: valuation models, risk models and optimization models
- Other allocation and risk contraints: transaction and liquidity costs
- Tactical allocation: risk budgeting, incentive schemes and the lesson of behavioral finance
- Investors’ preferences, managers’ expectations
- Performance analysis: from performance attribution to risk attribution, performance ratios, alpha measures and risk-adjusted returns

The Course is structured in lessons, practical working groups and case studies.

For students who attend the course, the examination will be based on the notes, references and slides provided during the course and available on the e-learning platform.

For students who do not attend the course, the examination will be based on the following textbook (Appendixes and the following Chapters will NOT BE included in the examination questions: Chapter 8, 9, 12, 14, 15, 23, 24, 26):

Examination Methods

The evaluation will be based on a written examination.