Mean-variance portfolio theory, asset return, portfolio mean and variance, Markowitz model, efficient frontier calculation algorithm, single-index and multi-index models; Capital Asset Pricing Model (CAPM), Capital market line, pricing model, security market line, systematic and nonsystematic risk, pricing formulas, investment implications, empirical tests, performance evaluation; Multifactor models, CAPM as a factor model, arbitrage pricing theory (APT), multifactor models in continuous time, data statistics, estimation of parameters;
Utility functions, risk aversion, utility functions and the mean-variance criterion, linear pricing, portfolio choice, risk neutral pricing; Optimal portfolio growth, continuous-time growth, log-optimal pricing and the Black-Scholes equation; Multiperiod securities, risk neutral pricing, buying price analysis, continuous time evaluation; Fixed Income Security investment, modeling yield curves, managing a bond portfolio, performance analysis.

Texts/References:

• E.J. Elton, M.J. Gruber, S.J. Brown and W.N. Goetzmann, Modern Portfolio Theory And Investment Analysis, 8th Edition, Wiley India, 2010.
• N. Amenc and V. Le Sourd, Portfolio Theory and Performance Analysis, John Wiley, 2003.
• J.Cvitanic and F. Zapatero, Introduction to the Economics and Mathematics of Financial Markets, Prentice-Hall of India, 2007.
• D. G. Luenberger, Investment Science, Oxford University Press, 1998.
• J.C. Francis and D. Kim, Modern Portfolio Theory: Foundation, Analysis and New Developments, John Wiley, 2013.