(in Polish) Inwestycje finansowe 2600-IADz1IF
Lecture
1. Introduction to investment theory. Investor goals and constraints.
o Definition and features of financial investments
o Classification of financial assets
o Determinants of financial investments
o Securities and markets
2. Investment decision criteria.
o Classification of rates of return (nominal, real, risk-free rate, risk premium)
o Concept of expected rate of return
o Distribution of investment rates of return (characteristics of normal distribution – kurtosis, skewness), Value-at-Risk (VaR)
o Types of investment risk and risk metrics (variance, standard deviation)
o Risk diversification - classification (covariance and correlation coefficients of rates of return)
3. Investments in debt instruments.
o Classification and structure of interest rates (spot interest rate structure, term structure of interest rates)
o Theories on interest rate formation (liquidity preference, market segmentation, expectations theory)
o Features of a debt instrument (price, yield)
o Bond valuation model
o Sensitivity analysis of bonds to interest rate changes
4. Investments in equity instruments.
o Types and features of equity instruments
o Systematic and unsystematic risk
o Beta coefficient
o Asset pricing models (Sharpe’s single-index model, Markowitz model, CAPM, Capital Market Line - CML, and Security Market Line - SML, efficient frontier)
o Concept of capital market efficiency
o Assumptions and fundamentals of technical and fundamental analysis, stock market indicators
5. Traditional and advanced measures of financial investment efficiency (performance).
o Concept of benchmark, tracking error
o Performance ratios (Sharpe, Sortino, Jensen, Treynor)
6. Investment risk management using forward/futures contracts.
o Characteristics of forward/futures contracts
o Valuation model of a forward/futures contract
o Application of forward/futures contracts for risk hedging
7. Analysis and application of swap and option transactions.
o Interest rate swap
o Currency swap
o Characteristics and application of options
o Payoff functions, rights and obligations of the contracting parties
Tutorials (Classes)
1. Exercises on making investment decisions, including:
o Classification of rates of return (nominal, real, risk-free rate, risk premium)
o Concept of expected rate of return
o Distribution of investment rates of return (characteristics of normal distribution – kurtosis, skewness), Value-at-Risk
o Types of investment risk and risk metrics (variance, standard deviation)
o Risk diversification - classification (covariance and correlation coefficients of rates of return)
2. Examples of investments in debt instruments, including:
o Features of a debt instrument (price, yield)
o Bond valuation model
o Sensitivity analysis of bonds to interest rate changes
3. Examples of investments in equity instruments, including:
o Beta coefficient
o Asset pricing models (Sharpe’s single-index model, Markowitz model, CAPM, Capital Market Line - CML, and Security Market Line - SML, efficient frontier)
o Assumptions and fundamentals of technical and fundamental analysis, stock market indicators
4. Calculation of financial investment performance measures, including:
o Concept of benchmark, tracking error
o Performance ratios (Sharpe, Sortino, Jensen, Treynor)
5. Investment risk management using forward/futures contracts:
o Characteristics of forward/futures contracts
o Valuation model of a forward/futures contract
o Application of forward/futures contracts for risk hedging
6. Analysis and application of swap and option transactions:
o Interest rate swap
o Currency swap
o Characteristics and application of options
o Payoff functions, rights and obligations of the contracting parties
Course coordinators
Type of course
Learning outcomes
• Characterizes basic concepts related to financial investments, such as classification of financial assets, securities, and markets (K_W01).
• Explains the concept of the expected rate of return (K_W01).
• Applies advanced principles, procedures, and practices in the field of financial investments. Can use quantitative data analysis methods for asset valuation, portfolio optimization, and investment risk management (K_W02).
• Describes the characteristics of the distribution of rates of return (kurtosis, skewness) and the Value-at-Risk method (K_W03).
• Classifies rates of return (nominal, real, risk-free rate, risk premium) (K_W03).
• Indicates types of investment risk (K_W03).
• Discusses risk measures such as variance and standard deviation (K_W03).
• Presents theories regarding the formation of interest rates (liquidity preference, market segmentation, expectations) (K_W03).
• Describes the fundamentals of asset pricing models, such as the Sharpe, Markowitz, CAPM models, Capital Market Line (CML), and Security Market Line (SML) (K_W03).
• Characterizes performance indicators such as Sharpe, Sortino, Jensen, and Treynor (K_W03).
• Explains the application of forward/futures contracts for risk hedging (K_W03).
• Presents types of swap transactions (interest rate, currency) (K_W03).
• Characterizes payoff functions, rights, and obligations of parties in option transactions (K_W03).
• Analyzes the impact of complex technological, social, political, legal, economic, and ecological (ESG) processes on organizational financial decisions. Can assess the significance of modern civilization dilemmas for the functioning of the economy and incorporate these factors into the design and construction of organizational information systems (K_W05)
• Analyzes the classification of rates of return (nominal, real, risk-free rate, risk premium) in the context of investment decision-making (K_U01).
• Identifies types of investment risk (K_U01).
• Measures risk using variance and standard deviation (K_U01).
• Utilizes covariance and correlation coefficients for risk diversification in an investment portfolio (K_U01).
• Calculates the expected rate of return based on historical data and market forecasts (K_U02).
• Applies asset pricing models (e.g., Sharpe’s single-index model, Markowitz, CAPM) to evaluate investments (K_U02).
• Calculates the efficiency/performance of financial investments using ratios such as Sharpe, Sortino, Jensen, and Treynor (K_U02).
• Develops risk hedging strategies using forward/futures contracts (K_U03).
• Formulates payoff functions as well as the rights and obligations of transaction parties (K_U03).
• Identifies and diagnoses unusual financial problems and proposes flexible solutions to tasks embedded in unpredictable and dynamically changing market conditions (K_U05).
• Evaluates the effectiveness of various investment performance indicators (Sharpe, Sortino, Jensen, Treynor) and their practical application in finance (K_K01).
• Assesses the impact of using forward/futures contracts and swaps in investment risk management on a company's financial strategy (K_K01).
• Recognizes the importance and value of scientific knowledge in solving complex investment and data analysis problems in an organization. Demonstrates readiness to critically evaluate decision-making processes, seek expert opinions, and utilize external expertise to minimize risk (K_K02).
• Analyzes investment opportunities in various financial asset classes, taking into account economic and political conditions on both a national and global scale (K_K03).
• Formulates conclusions regarding ethics and responsibility in financial decision-making based on complex situations related to financial markets (K_K03).
Assessment criteria
1) Written Exam (open and closed questions) conducted in-person or remotely on the Kampus platform.
2) Tutorials (Classes):
- Written credit for tutorials (open and closed questions) in-person or remotely on the Kampus platform,
- Class participation (exercises, case studies),
- Project (group work),
- Class attendance.
Practical placement
Professional internships are not required for completing the course.
Bibliography
Primary literature:
- Francis J.C., Inwestycje. Analiza i zarządzanie, WIG Press 2000
- Jajuga K., Jajuga T., Inwestycje, Wydawnictwo Naukowe PWN, Warszawa 2010
Supplementary literature:
- Haugen R. A., Teoria nowoczesnego inwestowania, WIG PRESS 1996
- Sopoćko A., Rynkowe instrumenty finansowe, Wydawnictwo Naukowe PWN, Warszawa 2010
- Bodie, Kane, Marcus 2018, Essentials of Investments, McGraw-Hill Education