Faculty of Business and Economics

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This unit entry is for students who completed this unit in 2016 only. For students planning to study the unit, please refer to the unit indexes in the the current edition of the Handbook. If you have any queries contact the managing faculty for your course or area of study.

Monash University

6 points, SCA Band 3, 0.125 EFTSL

Undergraduate, Postgraduate - Unit

Refer to the specific census and withdrawal dates for the semester(s) in which this unit is offered.


Business and Economics

Organisational Unit

Department of Econometrics and Business Statistics


Dr Mike Callan



  • Second semester 2016 (Day)


Unit ETC4130 covers the subject material required for Actuaries Institute subject Part IIB Investment and Asset Modelling. The unit gives an introduction into the investment background for Australian financial institutions, especially those offering insurance and related financial products. It then addresses issues in asset liability management. The student is introduced to the characteristics and behaviour of various investment types and the understanding of the relationship between risk and return. Valuation methods for investment types are addressed. Economic and financial theories relevant to investment are studied. The techniques of setting investment objectives for different investment funds are covered. More detailed issues in relation to asset liability management are then addressed, including how investment policy for assets may assist in managing liabilities for financial institutions.


The learning goals associated with this unit are to:

  1. be able to describe and critically discuss the characteristics and behaviour of different Investment types under different economic conditions, understanding the relationship between risk and return and recognising risk factors which includes issuer default, counterparty failure, systemic liquidity, the collapse of speculative bubbles, shocks to the economic system and cyclical/structural changes
  2. develop an understanding of the methods used for valuation of the common forms of debt, equity, property and derivative securities. In particular students should be aware of the valuation methods and principles, data requirements and sources and the implicit assumptions and limitations of these models
  3. develop an understanding of the application and limitations of the major economic and financial theories relevant to investment, and be able to critically evaluate these theories including the efficient market hypothesis, the capital asset pricing model, multi-factor pricing models and theories from behavioural finance
  4. define appropriate investment objectives based on the liability profile of a fund
  5. specify appropriate investment constraints, based on the liability profile of a fund
  6. identify the characteristics of different types of asset models
  7. critically evaluate the appropriateness of an asset model for a given context
  8. derive consistent asset assumptions for asset models, taking into account historical data, prevailing industry expectations, contemporary investment literature, and other practical considerations such as tax
  9. apply asset assumptions, and the linkages contained within asset models, to real world situations
  10. describe and critically evaluate different approaches to asset allocation.


Within semester assessment: 40% Examination: 60%

Workload requirements

Minimum total expected workload to achieve the learning outcomes for this unit is 144 hours per semester typically comprising a mixture of scheduled learning activities and independent study. Independent study may include associated readings, assessment and preparation for scheduled activities. The unit requires on average three/four hours of scheduled activities per week. Scheduled activities may include a combination of teacher directed learning, peer directed learning and online engagement.

See also Unit timetable information

Chief examiner(s)


Students must have completed ETC4110 or by permission of the unit coordinator.