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2014/2015  KAN-CFIVO1003U  Investments

English Title

Course information

Language English
Course ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Semester
Course period Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Claus Munk - Department of Finance (FI)
Main academic disciplines
  • Finance
Last updated on 04-07-2014
Learning objectives
The course aims at providing students with the institutional information, the models, and the computational methods relevant for a systematic approach to investment decisions. Upon completion of the course the student should be able to:
  • Explain and apply measures of return and risk for individual securities and portfolios
  • Explain the concept of diversification, and compute return and risk measures for portfolios based on such measures for individual securities by using relevant vector and matrix representations and computations in Excel
  • Estimate means, variances, and covariances of returns, as well as alphas and betas appearing in index/factor models, by the use of historical data and Excel procedures
  • Derive and explain the mean-variance frontier using mathematical optimization for the case without portfolio constraints and by using numerical optimization in Excel for relevant cases with portfolio constraints
  • Explain utility functions and risk aversion, and explain how to find the optimal portfolio for given investor preferences
  • Explain how long-term investment decisions differ from short-term decisions, and explain and evaluate some popular long-term investment strategies
  • Explain and apply leading equilibrium asset pricing models such as the CAPM and various extensions thereof and, as part of that, explain the distinction between systematic and non-systematic risk
  • Explain the empirical performance of leading asset pricing models and relate that to the concepts of market efficiency and behavioral finance
  • Explain and apply key concepts and results related to interest rates and bond markets including yields, durations, and convexities, and perform relevant related computations in Excel
  • Explain and apply key concepts and results related to the use and valuation of basic derivative securities, i.e., forwards, futures, options, and swaps, and perform relevant related computations in Excel
  • Explain the role of bonds and derivative securities in risk and portfolio management
Exam ECTS 7,5
Examination form Written sit-in exam
Individual or group exam Individual
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period December/January
Aids allowed to bring to the exam Limited aids, see the list below and the exam plan/guidelines for further information:
  • Additional allowed aids
  • Books and compendia brought by the examinee
  • Notes brought by the examinee
  • Allowed calculators
  • Allowed dictionaries
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Course content and structure
The course develops a deep understanding of financial markets and how investors use the securities traded in financial markets. The course covers the following topics:
  • Risk and return
  • Portfolio theory and, in particular, mean-variance analysis
  • Index/factor models and consequences for portfolio choice
  • Introduction to multi-period investment strategies
  • Equilibrium in capital markets and the Capital Asset Pricing Model in various forms
  • Pricing anomalies, market efficiency, and behavioural finance
  • Fixed income securities, bond pricing, the term structure of interest rates, and interest rate risk management
  • The use and valuation of derivative securities
  • Excel is used throughout the course wherever relevant
Teaching methods
Lectures with exercises.
Student workload
Lectures 33 hours
Preparation for lectures 66 hours
Exercise classes 14 hours
Preparation for exercise classes 70 hours
Exam 4 hours
Final preparation for exam 19 hours
Expected literature
Bodie, Kane, and Marcus: Investments and Portfolio Management; Global 9th ed., 2011, McGraw-Hill (or similar).
Supplementary lecture notes and maybe a few articles.
Last updated on 04-07-2014