The courses are held in distance mode, which means that all lecture units (lecture parts and interactive parts) take place online. The final exam is held online.

There are a few changes to the interactive part and its grading:

There will be no in-class tests in the interactive part, but only student presentations of mini-cases. The solutions of the mini-cases must be uploaded to Learn before each interactive unit. Students still need to check at least 70% of all mini-cases to pass the course. The grading of the interactive part will be based solely on the percentage of checked mini-cases if all presentations are correct or if they were never selected to present. A negative assessment of a student's presentation reduces the number of mini-cases checked by 20% (the basis being 100% of all mini-cases). For example: If a student checks 80% of the mini-cases and fails one presentation, the percentage of checked mini-cases will be reduced to 60% and will result in a fail.

Students with two negative assessments fail the course. If a student cannot present a mini-case due to technical problems (on his/her side), the grading is the same as for a negative assessment.

Unit 1

o What is Finance about?

o Why is Finance relevant?

o What are the main problems we want to solve?

o Discounting/Present Value/Net Present Value overview

Unit 2

o Utility and risk preferences

o Statistical Properties (Expectation, Variance, Covariance, Correlation), Diversification for portfolios

Unit 3

o Mean-Standard Deviation relationship (for 2-Asset-Portfolio and N-Asset-Portfolio)

o Efficient Frontier with and without risk-free asset

o Tangency Portfolio

Unit 4

o Capital Asset Pricing Model

o Beta Estimation

o Empirical Analysis of Efficient Portfolios and the CAPM

Unit 5

o Factor Models

o Decomposition of Risk (systematic – unsystematic risk)

o Estimating Weights of Factor Portfolios

After completing the course, students will be able to

· understand the relationship of risk and return for financial assets.

· calculate the risk and return of financial assets and portfolios.

· utilize diversification for optimal investment choices.

· identify optimal portfolio weights of a set of risky financial assets.

· comprehend the assumptions and shortcomings of the Capital Asset Pricing Model.

· decompose the risk of a financial asset to firm-specific and common factors.

· compute a measure for market-related risk of individual financial assets and portfolios.

Participation is compulsory in the interactive part. There are grade related performance assessments in each interactive unit. There is absolutely no way to get these points if you are not present for the entire unit.

The course is composed of two parts, a lecture part (5 units) and an interactive part (5 units). The lecture part is organized in only one big class for all students of the specialization. The interactive part is organized in small groups (max. 30 students). The five lecture units take place once a week. The five interactive units also take place once a week, but start one week after the first lecture unit.

The teaching approach of the lecture part is class room teaching type. In the interactive part a mix of methods is applied that includes presentations by the lecturer, class discussions, student presentations of numerical examples (“mini-cases”) and real-life case studies, in-class tests and a final exam.

Based on the introduction to the underlying concepts in the lecture part, students will have to prepare small numerical problems ("mini-cases") for the interactive part. E.g.: The concepts of the first lecture unit are applied and deepened in the first interactive unit, and so on. The mini-cases are either presented by students or evaluated by means of in-class tests and solutions are discussed with the lecturer. In addition, more involved case studies are discussed to provide more insight into industry applications.

The components for the grades are weighted as follows:

• 40% lecture part (final exam)
• 60% interactive part

Interactive part: Students have to prepare mini-cases for the weekly sessions and have to indicate (“check”) the mini-cases they can solve and are ready to present before each session. Each example will either be presented by a randomly selected student who checked this example or will be tested by means of an in-class test for all students. There will be two in-class tests. Students need to check at least 70% of all mini-cases to pass the course. The presentation of mini-cases will be evaluated. In order to pass the course, students need to be able to correctly solve the mini-cases they present. Note that indicating mini-cases you did not solve or cannot explain or present leads to a penalty (for details see Grading below). As many mini-cases can only be solved by using Excel or R students are required to bring their own notebooks to the interactive units to be able to solve in-class tests.

Grading: Formally, the evaluation is based on the total number of credits earned (>50% of credits needed to pass). The total number of credits C will be computed by C = 0.4*C_lecture + 0.6*C_interactive. C_lecture denotes the percentage of credits earned at the final exam of the lecture part. C_interactive denotes the percentage of credits earned for the interactive part and will be computed by C_interactive = X*0.5*(Test₁ + Test₂). Test_i denotes the percentage of credits earned at in-class test i. X equals one, if at least 70% of all mini-cases have been checked by the student in advance AND all presentations of solutions (if any) have been correct, and zero otherwise. In case that an incorrect solution is presented there will be an opportunity for compensation in the last unit of the interactive part.

The following grading scheme is applied:

square bracket [ ] = percentage is still included in the quantity
round bracket ( ) = percentage is no longer included in the quantity

Students need to be admitted to the specialization Finance: Markets, Institutions & Instruments to register for the course.

basic knowledge of Excel or R, basics in Statistics

felix.fattinger@wu.ac.at