Teaching code

4S008962

Credits

6

Coordinator

Francesco Rossi

Language

Italian

Scientific Disciplinary Sector (SSD)

SECS-S/06 - MATHEMATICAL METHODS OF ECONOMICS, FINANCE AND ACTUARIAL SCIENCES

Courses Single

Authorized

Moodle Seminars 0

The teaching is organized as follows:

Learning objectives

The objectives of the course are the introduction of advanced quantitative models for finance.
The course the main concepts underlying advanced asset valuation, and in particular of portfolio management.
At the end of the course, the student is expected to be able to perform operations involving the financial instruments explained in class, and to understand the theoretical ideas illustrated in the course.
While not being a mandatory prerequisite, the previous attendance to the course Financial Mathematics is strongly recommended.

Prerequisites and basic notions

Although there is no formal preparatory course, to make learning profitable it is advisable to have already passed the Financial Mathematics exam.

Program

1. Technical Analysis (TA)

1.1. Study of the evolutionary characteristics of prices and volumes over time. Recognition of the main figures.
1.2. Heuristic-quantitative models: moving averages and main indicators based on prices and volumes. The logistics function. 1.3. Qualification of the current market phase, setting of the operational strategy, estimation of the evolutionary potential based on models and decision-making parameters.

NOTE: The analysis of time series of securities or indices will also be carried out using the applications https://it.investing.com or https://finance.yahoo.com

2. Modern Portfolio Theory (MPT) and the capital market equilibrium
2.1. Portfolio Choices. Feasible choices and efficient choices. Models and parameters based on selection choices. The mean-variance criterion. The Markowitz Model: analysis with two or more securities with a random return, with two or more securities with a random return and a security with a certain return, with two or more securities with a random return, a security with a certain return and the possibility of borrowing at cost Certain. The Capital Asset Line (CAL).
2.2. ROI, ROE and debt sustainability. Maximum rate of rationally sustainable debt.
2.3. International diversification. The global portfolio. Returns on investments in foreign markets. The risk on foreign securities, returns resulting from international diversification, exchange rate risk effect.
2.4. Simplified portfolio selection models: Sharpe's diagonal model, multiple index models. Analysis of the Principal Components/Main Factors with experience on national, sectoral indices and mutual funds.
2.5. The preferred choice. Expected utility: construction of the utility function, risk aversion, indifference, certain equivalent. Identification of the preferred/optimal portfolio for the decision maker. Empirical evidence of preferred alternatives.
2.6. Capital market equilibrium models: the Capital Asset Pricing Model (CAPM), the synthetic measure of the decision maker's degree of propensity/aversion to risk. The Capital Market Line (CML). The Security Market Line (SML). Multi-factor models and arbitrage pricing theory (APT).
2.7. Evaluation of the performance of a portfolio: return measures, risk measures, risk-return measures. Value at Risk (VaR), Expected Shortfall (ES).
2.8. Operational limits of the Markowitz model, introduction to the Black-Litterman model and notes on Resampling

NOTE: For the formalization and solution of the most significant models of this second part, the free programming language R and the RStudio environment will be introduced, available from https: //posit.co/download/rstudio-desktop/

Bibliography

Didactic methods

The lessons are carried out according to the frontal teaching method and, while maintaining the focus of attention on the students present in the classroom, they will see the support of video recording available on the Moodle platform on the page dedicated to the course.

The availability of a Tutor is expected to assist with the training and evaluation process as well as educational-integrative, preparatory and recovery activities.

Learning assessment procedures

With the help and under the supervision of the teacher, study groups will be formed (maximum 3 students) who will analyze some titles/indexes over time and produce a written paper, called Project Work (PW), to be sent via email to the teacher for evaluation at least one week before the exam session in which the students involved are interested. In this PW the techniques, models and methods developed during the course will have to be used in the best possible way.
Only after a positive evaluation of the PW (maximum 3/30 bonus) will it be possible to access the exam.
The PW is part of the methods of active participation of students in the course and is introduced with the aim of:
- stimulating the student to systematically and assiduously study the subject as the various themes are addressed and therefore to improve the learning process seen that the methods and models that are proposed are the basis on which more complex methods and models are developed that are proposed in the succession of lessons;
- improve skills and qualities in interpersonal relationships and in particular in team working;
- improve presentation/exposition skills and quality using typical asset management schemes and vocabulary.
The aforementioned elements play an important role in professional qualification and are highly regarded on the job market.
The exam consists of a written test of:
- 30 minutes for the first part of the program;
- 50 minutes for the second part which will also include an open question and a choice question.
Any interview, at the discretion of the teacher, is aimed at verifying the depth and breadth of preparation.

Evaluation criteria

At the end of the course the student will have to demonstrate that he is able to master the themes and models under analysis.
The ability to analyse, identify, apply and solve problems/exercises by discussing their validity and interpretation will be considered fundamental.

Criteria for the composition of the final grade

The final grade will take into account the Project Work score, the results of the written exam.
Oral interview solely at the discretion of the teacher.

Exam language

Italiana