3️⃣CFRM 503: Asset Allocation & Portfolio Management

This course felt like a more sophisticated and directed continuation of CFRM 501. It was a delicate yet palatable blend of recognizing the mathematics behind asset management, and applying them.

Reading Material:

• Strategic Asset Allocation: Portfolio Choice for Long Term Investors, J. Campbell.

This course taught me mean-variance and utility maximization for strategic asset allocations, in the context of real world constraints. Starting with factor models, risk decomposition and risk attribution, then focused on daily portfolio management such as rebalancing, performance measurement and implementation.

Overall Syllabus

1. Uncertainty-Free Investments, Portfolio Calculations, Diversification, Mean-Variance Allocation Model

2. Fund Separation Theorems, Central Line Algorithm, Sensitivity of Inputs, Addressing M-V Inputs

3. Investor Goals, Risk Tolerance Questionnaires, Utility Functions, Utility Maximization

4. Risk Decomposition and Attribution

5. CAPM and APT, What is an Asset Class, How Important is Asset Allocation

6. Statistical and Market Factors, Fama-French, Yield Curve Modeling

7. Fixed Income, Performance Measurement and Risk Measures, Fundamental Law of Active Management, Conditional Distributions

8. Performance Measurement and Attribution, Scenario Analysis

9. Rebalancing, Derivatives, Benchmark Qualities, Scenario Analysis

10. Tax-Management, Home Country Bias, Stepwise Factors

Asset Allocation

• Allocation for long-only and long-short portfolios

• Mean-Variance Optimization

  • Separation Theorems

  • Benchmark-relative portfolios

• Downside risk measures and utility maximization

• Multi-period asset allocation models

• Risk models and risk decomposition

• Factor models

• Forecasting and parameter uncertainty

Portfolio Management

• Investment vehicles

• Benchmarking and basis risk

• Performance measurement and attribution

• Rebalancing policies

• Using options and futures to control risk or seek return

• Security screening

• Fundamental Law of Active Management

• Tax-Aware implementation