Teaching Methodologies
This one semester course consists of 45 hours of contact with the teacher (3 hours per week) and 62 hours of
autonomous work (total: 107 hours). The course is credited with 4 ECTS.
The course is structured in three parts. First, the theoretical foundations of each topic are presented. Second,
the students solve case studies to apply the theoretical background. Third, the students need to work on a
group assignment with oral presentation about one of the topics discussed in classes.
Final grades under a continuous assessment evaluation methodology will be based on three components:
1. Participation and attendance: 5%;
2. Group assignment: 35%;
3. Written test: 60%.
Students can also apply for a final exam (100% of the final grade) concerning all topics of syllabus.
Learning Results
• Know the major financial markets and financial instruments;
• Interpret and use the yield curve to formulate trading decisions in the bond market;
• Compute the rate of return of an investment in the bond market;
• Characterize the interest rate risk exposure of a bond portfolio;
• Know how to compute the risk and return of a portfolio of assets;
• Know how to determine and design an efficient portfolio;
• Know how to use the CAPM;
• Know how to evaluate the performance of an investment portfolio;
• Being able to interpret the market data of futures contracts;
• Know how to design hedging and speculating strategies with futures;
• Pricing futures and forwards contracts;
• Being able to interpret the market data of financial options;
• Know how to design hedging and speculating strategies with options;
• Pricing financial options via CRR and BSM models.
Program
1 Financial markets and system
Foundations of investment decisions
Money and Forex, Stock, Bond, Derivatives market
Initial public offers, short selling operations
Exchange markets
2 Bond market
Bond features
Term structure of interest rates
Valuing bonds
Rates of return
Rating and credit risk
Interest rate risk
3 Portfolio theory
Risk and return
The investment opportunity set
The Markowitz efficient frontier
Capital allocation between the risky asset and the riskfree
asset
Efficient frontier
Optimal portfolios
Index models
4. Equilibrium in the capital markets
Capital asset pricing model
Extensions of CAPM
Arbitrage pricing theory
Empirical evidence on security returns
Market efficiency
Portfolio performance evaluation
5. Derivative markets:
Swaps, forward and futures contracts
Futures, forwards, futures and options prices and markets
Properties of option prices
Option strategies
Binomial model and BlackScholesMerton
option pricing model
Curricular Unit Teachers
Internship(s)
NAO
Bibliography
Bernstein, P. L. (1992), Capital Ideas: The Improbable Origins of Modern Wall Street, John Wiley & Sons.
• Bodie, Z., Kane, A. and Marcus, A. (2006), Investments, 7th edition, McGrawHill.
• Elton, E. J., Gruber, M. J., Brown, S. J. And Goetzmann, W. N. (2006), Modern Portfolio Theory and Investment
Analysis, 7th edition, John Wiley & Sons.
• Fabozzi, F. J. (2006), Bond Markets, Analysis and Strategies, 6th edition, PrenticeHall.
• Hull, J. C. (2008), Options, Futures, and Other Derivatives, 7th edition, Prentice Hall.
• Martellini, L., Priaulet, P. e Priaulet, S. (2003), FixedIncome
Securities: Valuation, Risk Management and
Portfolio Strategies, John Wiley & Sons.
• Mota, A. G. et al (2009), Investimentos Financeiros: Teoria e Prática, Sílabo.