Postgraduate Course: Portfolio Theory (MATH11149)
Course Outline
School  School of Mathematics 
College  College of Science and Engineering 
Credit level (Normal year taken)  SCQF Level 11 (Postgraduate) 
Availability  Not available to visiting students 
SCQF Credits  15 
ECTS Credits  7.5 
Summary  This course is delivered by Heriot Watt University and is only available to students on the MSc Financial Mathematics programme.
This aim of this course is to provide postgraduate students with a broad knowledge of asset pricing and portfolio selection models. 
Course description 
Utility Theory.
Stochastic Dominance.
Measures of Investment Risk.
MeanVariance Portfolio Theory and alternatives Models of Asset Returns.
Capital Asset Pricing Model.
Efficient Market Hypothesis and behavioural finance. (prospect theory)

Entry Requirements (not applicable to Visiting Students)
Prerequisites 

Corequisites  
Prohibited Combinations  
Other requirements  None 
Course Delivery Information

Academic year 2017/18, Not available to visiting students (SS1)

Quota: None 
Course Start 
Semester 2 
Timetable 
Timetable 
Learning and Teaching activities (Further Info) 
Total Hours:
150
(
Lecture Hours 40,
Summative Assessment Hours 2,
Programme Level Learning and Teaching Hours 3,
Directed Learning and Independent Learning Hours
105 )

Additional Information (Learning and Teaching) 
Examination takes place at HeriotWatt University

Assessment (Further Info) 
Written Exam
100 %,
Coursework
0 %,
Practical Exam
0 %

Additional Information (Assessment) 
Examination 100%. Exam is sat at and organised by HeriotWatt University. 
Feedback 
Not entered 
Exam Information 
Exam Diet 
Paper Name 
Hours & Minutes 

Main Exam Diet S2 (April/May)  Portfolio Theory MATH11149  2:00  
Learning Outcomes
 Derive the properties of a utility function;
 State the conditions for absolute, first order and second order stochastic dominance;
 Calculate some important measures of risk: variance, semivariance, shortfall probability and mean shortfall;
 Calculate the mean and variance of return on a portfolio of assets;
 Demonstrate an understanding of methods used to select portfolios of assets, including utility theory, stochastic dominance and meanvariance analysis;
 Describe the purpose and calculation of the following: opportunity set, efficient frontier, indifference curve, separation theorem;
 Develop a critical understanding on the theory of meanvariance model and understand its modifications using other risk measures;
 Describe the properties of singlefactor and multifactor models. Show how to fit a singlefactor model to market price data;
 Discuss the assumptions underlying and applications of the Capital Asset Pricing Model ;
 Derive the capital market line and the security market line;
 Understand the concept of risk premium in Arbitrage Pricing Theory;
 State the weak, semistrong and strong forms of the efficient market hypotheses and discuss their economic implications;
 Discuss the topics in prospect theory: framing, reference points, probability estimates.

Reading List
Elton, E., Gruber, M., Brown, S.J. & Goetzmann, W.N. (2006). Modern Portolio Theory and Investment Analysis, 6th edition. Wiley. 
Additional Information
Graduate Attributes and Skills 
Not entered 
Additional Class Delivery Information 
Taught at HeriotWatt University 
Keywords  FPTh 
Contacts
Course organiser  Dr David Siska
Tel: (0131 6)51 9091
Email: D.Siska@ed.ac.uk 
Course secretary  Ms Hannah Burley
Tel: (0131 6)50 4885
Email: Hannah.Burley@ed.ac.uk 

