NMFM431 - Investment Analysis Exercise Class

Investment Analysis is an elective course from financial mathematics. During lectures, we teach students about principles of financial markets and the most frequent tradable products. We start with explaining the concept of interest rates and its meaning in the financial world. Further, we continue to portfolio optimization problems, where we focus on the Markowitz risk-return formulations. On exercise classes, number of practical problems and various solution approaches are presented and practised.

Time and classroom of lecture and exercise class:

 Lecture Wednesday 12:20 - 13:50 - K7 Exercise Class Thursday 15:40 - 17:10 - K7

Recommended literature:

 see SIS.

Webpage of the course in SIS is here. More detailed information about lectures and exam please see the webpages of doc. Kopa.

The language of the exercise class will be Czech unless someone requires English. All learning materials will be given in English.

Conditions for course credit (zápočet):

• Successfull completion of an assignment on the Markowitz model. (assigned on 18th November)
• Successfully pass the course-credit exam
• Presentation on a topic from the financial world.

The exercise class will be divided into two parts. In the first part (cca 9 weeks), we will discuss problems from financial mathematics. Learning material with solved examples will be handed to students. We will also go through the examples during exercise class. Students are not required to attend the exercise class.

In the second part presentations of students on selected topics from financial world will be given. List of topics will be sent out at the beginning of November. After assignment of topics, schedule of talks will be given. These will be performed during exercise classes during December.

The course-credit exam will take place on 10th January 2022 at 10:40 and it will be held on-line. Join it by 10:35 here. The exam will consist of 4 sections, with problems similar to examples/exercises in the study material.

• Interest rate basics - 18 points,
• shares - 9 points,
• utility functions + risk measures - 7 points,
• presentations - 6 points,
• optimization problem formulation + solution - 16 points,
• this problem will be part of either shares or utility functions sections.
One would need 37/56 - 66% of points to pass.

The program of the last exercise class (6th January 2022) will be a talk/discussion given by Vojtěch Kačena. Mr. Kačena is a MFF UK graduate, who holds a doctor degree in Mathematics from Columbia University. During his professional career, he spent many years abroad working for BCG focusing on corporate strategies and private equity transactions. Nowadays, he leads a trading company focused on Energy and Crypto trading. Anyone is welcome to join the exercise class. Active participation and questions will be appreciated.

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Presentation
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Assignment
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Course credit exam
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Course credit

Learning Materials

Exercise Class Program:

• Week 1: Section 1 - Interest Rate Basics
• Section 1.1 + Examples, Exercises 1.1 - 1.3
• Section 1.2 + Examples 1.4
• Week 2: Section 1 - Interest Rate Basics
• Examples, Exercises 1.5 - 1.9
• Week 3: Section 1 - 2 - Construction of Yield Curve, Financial Arbitrage
• Examples, Exercises 1.10 - 1.11
• Section 2, Examples, Exercises 2.1 - 2.2
• Forward rates
• Week 4: Section 3 - Duration and Convexity
• Section 3, Examples, Exercises 3.1 - 3.5
• Week 6 - 8: Section 4 - Portfolio Selection
• Week 6: Sections 4.1, 4.2 + Examples, Exercises 4.1 - 4.3
• Week 7: Sections 4.2,4.3,4.4 + Examples, Exercises 4.4 - 4.9
• Week 8: Exercises 4.10 - 4.12
• Solutions of Week 8 problems are available here.
• Week 9: Sections 5, 6 - Other Risk Approaches
• Week 10 - 12: Presentations
• Schedule is published below.
• Week 13: Talk/discussion with Vojtěch Kačena

Markowitz Homework Assignment: was assigned on 18th November 2021.

• Universal assignment of the homework.
• Data of US treasury bonds yields.
• Deadline is 6th January 2022.

Presentations Schedule:

16. December

Presentations - free topics: Commodities (agricultural), Commodities (energy), Commodities (oil, coal, gas), Emission certificates, Forex (foreign exchange), Stock Exchanges, Cryptocurrencies, Blockchain, ETF (exchange traded funds), Forward Rate Agreements, IBOR Rates, Caps and Floors, Swaps (without CDS), CBO (Collateralized Debt Obligations), CDS (Credit Default Swaps), Asian Options, Barrier Options, Monetary policy instruments of CNB.

Book the topic via email or at the exercise class (first come first served), you are welcome to come up with your own topic too. Length of the presentation should be around 15-20 min, please prepare your slides which will be projected in the classroom. During the presentation, introduce your topic, describe its properties, use, principles, pricing, history, success stories and disasters, crashes or some other interesting things. There will be few questions in the exam checking your knowledge from the presentations. It will be also possible to win bonus points for the course-credit exam for good questions.