Optimization Methods in Asset Management from Coursera

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Syllabus

Course Overview

Mean-Variance Analysis and CAPM

In this module, we will cover topics related to Mean-Variance Analysis and Capital Asset Pricing Model (CAPM), which is a fundamental theory in portfolio selection. CAPM can be used to price risky assets in the market. We will start by utilizing Mean-Variance Analysis to construct an optimal portfolio in an arbitrage-free market. Then we will introduce the efficient frontier and capital market line. Finally, we use excel to implement Mean-Variance optimization and construct a portfolio with the highest Sharpe ratio. In practice, Mean-Variance Analysis and CAPM can also be extended in other pricing techniques such as factor model. In the assignment, you will be required to apply Mean-Variance Analysis to do portfolio selection, Sharpe ratio computation, and risky asset pricing, etc.

Assignment week

Practical Issues in Implementing Mean Variance

In this module, we show the difficulties in implementing Mean-Variance and provide possible methods to improve the estimated frontier by revising constraints and amending parameter estimation. VaR and CVaR are introduced as different measurements about risk beyond variance. In the second lesson, we will also learn common ETFs and their returns and volatility. ETFs play an important role in trading and asset management because of their features at low costs, tax efficiency, and stock-like behaviors. In the last lesson, we will introduce some facts about typical statistical biases and pitfalls, as well as underlying reasons. This can remind us to be more careful when doing the statistical estimation. If you have any questions, you should reach out to us on the discussion forum.

Assignment Week

Other Applications of Financial Engineering

In the real world, transaction costs are charged when we buy or sell assets in the market. How to model transaction cost is a key question in portfolio execution. In this module, we learn about the basic market micro-structures, including order book, bid-ask spread, measurement of liquidity and their effects on transaction costs. Then we enrich Mean-Variance portfolio strategies by taking transaction costs into consideration. By learning this module, you will be better prepared to deal with real-world investment problems.

Good to know

Know what's good

, what to watch for

, and possible dealbreakers

Explores topics in finance, which is used in the banking industry

Taught by experts in finance, who have significant experience in the field

Develops portfolio construction and risk management skills, which are essential for financial analysts

Covers real-world challenges in portfolio implementation, providing practical insights for learners

Provides a foundation in financial engineering, which is valuable for careers in finance

Requires familiarity with statistical concepts, which may be a barrier for learners without a background in statistics

Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Optimization Methods in Asset Management with these activities:

Review basic statistics

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Warms up your understanding of statistical concepts and prepares you for the course's quantitative focus.

Browse courses on Statistics

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Review probability distributions (e.g., normal, binomial, Poisson)
Practice calculating means, variances, and covariances
Refresh yourself on hypothesis testing and confidence intervals

Read 'Modern Portfolio Theory and Investment Analysis' by Elton, Gruber, and Brown

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Provides a comprehensive and in-depth understanding of the theoretical foundations and practical applications of portfolio management.

View Modern Portfolio Theory and Investment Analysis on Amazon

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Read chapters related to Mean-Variance analysis, risk management, and portfolio optimization
Take notes and highlight key concepts
Discuss the book's content with classmates or a mentor

Form a Study Group

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Collaborate with peers to reinforce concepts and gain diverse perspectives on course material.

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Find classmates with similar interests and schedules
Establish meeting times and locations
Review course material together
Discuss concepts and solve problems collaboratively

Five other activities

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Walkthrough Mean-Variance Analysis

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Provides a structured approach to understanding the core concept of the course and applying it to portfolio construction.

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Find tutorial resources online or in textbooks
Follow along with examples and practice exercises
Implement Mean-Variance analysis in a spreadsheet or coding environment

Attend Industry Webinars

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Connects you with experts and practitioners in the field, providing valuable insights and networking opportunities.

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Research industry events and webinars related to portfolio management
Register for and attend selected events
Network with speakers, panelists, and other attendees

Solve Mean-Variance Optimization Problems

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Strengthens your problem-solving skills and deepens your understanding of the mathematical foundations of portfolio theory.

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Find practice problems online or in textbooks
Solve problems using Mean-Variance optimization techniques
Compare your solutions to the provided answers
Identify and address areas for improvement

Create a Portfolio Simulation

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Develops your practical skills in portfolio construction and risk evaluation.

Browse courses on Portfolio Management

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Choose a portfolio simulation software or platform
Enter real-world market data and investment parameters
Run simulations to evaluate portfolio performance under various scenarios
Analyze the results and make informed investment decisions

Develop a Risk Management Plan

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Applies the concepts learned in the course to a practical scenario, enhancing your ability to manage investment risks.

Browse courses on Risk Management

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Gather data on potential investments
Identify and assess potential risks
Develop strategies to mitigate identified risks
Create a comprehensive risk management plan

Career center

Learners who complete Optimization Methods in Asset Management will develop knowledge and skills that may be useful to these careers:

Portfolio Manager

Portfolio Managers manage investment portfolios for individuals and institutions. This course will help you develop the skills you need to succeed in this role, including portfolio optimization, risk management, and financial analysis.

See salaries and explore the career path for Portfolio Manager

Quantitative Analyst

Quantitative Analysts use mathematical and statistical models to analyze financial data. This course will help you develop the skills you need to succeed in this role, including portfolio optimization, risk management, and data analysis.

See salaries and explore the career path for Quantitative Analyst

Investment Analyst

Investment Analysts evaluate and recommend investments. This course will help build a foundation in financial modeling, portfolio management, and risk assessment, all of which are essential skills for Investment Analysts.

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Risk Manager

Risk Managers identify and mitigate financial risks. This course will help you develop the skills you need to succeed in this role, including risk assessment, portfolio optimization, and financial modeling.

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Financial Analyst

Financial Analysts provide financial advice to individuals and institutions. This course will help you develop the skills you need to succeed in this role, including financial modeling, portfolio management, and risk assessment.

See salaries and explore the career path for Financial Analyst

Actuary

Actuaries are professionals who evaluate and manage financial risks. This course will help build a foundation in financial modeling, risk assessment, and portfolio management, all of which are essential skills for Actuaries.

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Insurance Underwriter

Insurance Underwriters assess and price insurance risks. This course may be useful in developing the skills for this role, as it covers topics such as portfolio optimization, risk assessment, and financial modeling.

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Commercial Banker

Commercial Bankers provide financial services to businesses. This course may be useful in developing the skills for this role, as it covers topics such as financial modeling, portfolio management, and risk assessment.

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Data Scientist

Data Scientists use data to solve business problems. This course may be useful in developing the skills for this role, as it covers topics such as data analysis, statistical modeling, and machine learning.

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Wealth Manager

Wealth Managers provide comprehensive financial advice to high-net-worth individuals and families. This course may be useful in developing the skills for this role, as it covers topics such as portfolio management, risk assessment, and financial planning.

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Operations Research Analyst

Operations Research Analysts use mathematical and analytical techniques to improve the efficiency of organizations. This course may be useful in developing the skills for this role, as it covers topics such as optimization, simulation, and data analysis.

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Statistician

Statisticians collect, analyze, and interpret data. This course may be useful in developing the skills for this role, as it covers topics such as statistical modeling, data analysis, and probability theory.

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Investment Banker

Investment Bankers help companies raise capital and provide financial advice. This course may be useful in developing the skills for this role, as it covers topics such as financial modeling, portfolio management, and risk assessment.

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Financial Planner

Financial Planners help individuals and families manage their finances. This course may be useful in developing the skills for this role, as it covers topics such as portfolio management, risk assessment, and financial planning.

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Economist

Economists study the production, distribution, and consumption of goods and services. This course may be useful in developing the skills for this role, as it covers topics such as economic modeling, data analysis, and econometrics.

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