Professor: Javier Pena
Course Number: 46979
Description: This course presents a modern treatment of the buy side of quantitative finance. The course is organized in three major parts. In the first part, we will give a high-level discussion of asset management both from an academic and from a practical perspective. Factor models play a central role in this high-level discussion. Factors are associated to the drivers of asset returns. Assets earn high returns (risk premiums) to compensate owners for the losses they incur during bad times, i.e., because of their exposure to underlying factor risks. In the second part of the course, we will discuss specific risk factors for different asset classes that have been documented in academic research. We will describe how to use statistical methods to validate the existence of premiums associated with these factors; how to construct portfolios based on underlying factor models for investors with different preferences and constraints; and how to back-test the performance of these portfolios. In the third part of the course we will discuss performance evaluation and practical aspects related to transaction costs, liquidity, taxes, and cash management. Students will complete a project based on the techniques covered in the course and present their results on the last day of classes.
Prerequisites: 46929, 46936, 46956, 46972, 46973, 46975