Advanced investments
Mr Brendan O'Connell
6 points * 3 hours per week * First semester * Caulfield, In-house * Prerequisite: Completion of an acceptable undergraduate degree.
Objectives On completion of this subject students should be able to: explain the basic nature and workings of derivative financial instruments such as swaps, options and futures; able to appreciate the specific application of derivative instruments to hedging an investment portfolio; familiar with the determinants of share prices and the conditions under which it is possible to predict prices in the share market; able to calculate measures of performance for portfolios; able to appreciate the various theories developed; to explain the term structure of interest rates; able to calculate the duration of a security and the duration gap of a portfolio and use the latter to manage the interest rate risk of a portfolio.
Synopsis Financial deregulation and instability in global economies; volatility of asset prices and consequent risks to investors; financial exposures; measuring risk (including interest rate risk) and awareness of the tools available for removing or modifying such risks including futures, forwards, options and swaps.
Assessment Assignment: 30% * Final examination (3 hours): 70%
Prescribed texts
Haugen R A Modern investment theory 3rd edn, Prentice-Hall, 1993.