Quantitative Investment Management

About the Course:Regulatory reforms across the world are gradually being introduced to reduce trade impediments between nations and usher in free market based pricing. Cross border investments through direct/portfolio routes are also being enticed as a medium for funding of growth and developmental activities. In addition, the governments of developing nations continue to pursue their strategy of partial privatization of the frontier sectors in an attempt to raise revenues for the exchequer as well as reduce operational losses with increased efficiency. Under these stimuli, scientific investment management by the investor fraternity becomes of cardinal necessity for generating competitive returns and surviving in the marketplace. Financial instruments have proven to be immensely useful as versatile investment avenues. Their vitality can be gauged from the exponential growth in trading volumes as well as the advent of new structured products literally on a day to day basis.INTENDED AUDIENCE: The audience would comprise of those desirous of get acquainted with the quantitative techniques of financial securities valuation and their strategical application in investment management of structured portfolios. The learners would be able to appreciate the nuances that have led to the origin and extensive development of this field of knowledge.PREREQUISITES:Senior School MathematicsINDUSTRY SUPPORT:This course will attract immense recognition in the entire financial services industry including banks, stock & commodity exchanges, stock & commodity brokers, portfolio managers, investment bankers, market regulators etc. Those employed in corporate finance shall also find it valuable as it would add to their versatility. Academicians will find it a gateway to further work in related areas.

Week 1: Overview & Introduction, Hybrids & Derivatives, Risk, Return & Arbitrage, Arbitrage Free Pricing Week 2:Intrinsic value of bonds, Arbitrage free pricing of bonds, Forward rates, Bond pricing with forward rates, Bond valuation with binomial trees, Pathwise valuation Week 3:Valuation of bonds with embedded options, Impact of yield curve changes on bond prices, Spot rates, Term structure of interest rates, YTM, Implied assumptions & issues with YTM, Yield spreads, Option adjusted spread (OAS) Week 4:Calculation of OAS, Uses of OAS, Interest rate risk & its measures, Macaulay duration of a bond & its properties, Yield curve shifts & duration Week 5:Duration of bonds with embedded options, Key rate & one sided duration, Modelling of return on fixed income securities Week 6:Immunizing a single liability, Bullet vs Barbell, Convexity issues, Effect of yield curve shifts, Portfolio statistics & cardinals. Yield curve strategies Week 7:Floaters, Caps & Floors & their valuation, Overview of Derivatives; Forwards: Introduction & Pricing, Arbitrage, Forwards Pricing on Consumption Assets; Futures: Introduction & Salient Features. Week 8:Options: Price Bounds, Put-Call Parity; American Options; Trading Strategies Week 9:Stochastic Processes: Basic Theory, Brownian Motion, Ito’s Equation; Stock Price Distribution Week 10:Option Pricing: Binomial Model, Black Scholes Model; Option Greeks Week 11:Futures: Margining & MTM, Basics of Futures Hedging, Applications of index futures & interest rate futures, Swaps & their applications Week 12:Mean Variance Portfolio Optimization, Systematic & Unsystematic Risk, CAPM & APT