ABOUT SUBJECT

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	Tuesday 14:00 - 15:30 - K3
Exercise Class	Thursday 15:40 - 17:10 - K5

Recommended literature:

see SIS.

Webpage of the course in SIS is here. Some information about lectures and exam please see the old 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.

ABOUT EXERCISE CLASS

Conditions for course credit (zápočet):

• Successfull completion of an assignment on the Markowitz model. (assigned in mid 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 (7 weeks), we will discuss problems from financial mathematics. Learning materials with solved examples will be handed to students. These will be presented and discussed during exercise class. Students are not required to attend the exercise class.

In the second part (4 weeks) presentations of students on selected topics from financial world will be given. Topics shall be assigned by November 11th. After assignment of topics, schedule of talks will be given. They will run for four weeks from 21.11. till 12.12. If you know you cannot attend on some date, specify it in advance with topic assignment. Presentations can be done in pairs.

The course-credit exam will take place on December 19th. The exam will consist of 4 sections, with problems similar to examples/exercises in the study material. See exam from year 2021.

• 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. In case of failiure, there will be a 2nd attempt exam at the second half of January. Exact date will be determined after discussion with students.

Learning Materials

Download here the exercise class notes (last update 2022-09-30).

Exercise Class Program:

• Week 1: Section 1 - Interest Rate Basics
• Section 1.1 + Examples, Exercises 1.1 - 1.3
• Section 1.2 + Example 1.4
• Week 2: Section 1 - Interest Rate Basics, Construction of Yield Curve
• Examples, Exercises 1.5 - 1.11
• Week 3: Section 2 - Financial Arbitrage
• Examples, Exercises 2.1 - 2.2
• Forward rates
• Week 3-4: Section 3 - Duration and Convexity
• Section 3, Examples, Exercises 3.1 - 3.5
• Week 4 - 6: Section 4 - Portfolio Selection
• Week 4: Sections 4.1, 4.2 + Examples, Exercises 4.1 - 4.4
• Week 5: Sections 4.2,4.3,4.4 + Examples, Exercises 4.5 - 4.9
• Week 6: Exercises 4.10 - 4.12

Markowitz homework assignment.

• Universal assignment of the homework.
• Data of US treasury bonds yields.
• Hard deadline is 31st January 2025. If you want it corrected before mid-January, you need to hand it in before December 19, 2024.

Presentations schedule:

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), CDO (Collateralized debt obligations), CDS (Credit default swaps), Asian options, Barrier options, Monetary policy instruments of CNB, Government debt, Pension systems and sustainability, Pension funds, Inflation.

Book the topic via email or at the exercise class (first come first served, deadline November 13th), you are welcome to come up with your own topic too. Length of the presentation should be around 15-20 mins, please prepare your slides which will be shown 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.