Université Libre de Bruxelles
Solvay Business School
MBA 2005-2006
Investment
André Farber
Objective: to give an overview of portfolio management techniques.
Prerequisites: Finance
References:
Bodie, Kane and Marcus Investments 6th ed. McGraw-Hill 2005 (BKM)
Ross, Westerfield, Jaffe Corporate Finance 7th ed. McGraw-Hill 2005 (RWJ)
BKM and RWJ have a lot of material in common. If you own RWJ, I don’t think it is worth
buying BKM just for this course. It is, however, a useful book to own if you plan a career in
finance.
Organization of the course
I wish the course to be very interactive. I might lecture from time to time (sometimes, I can't
resist it) but I hope to reduce it to a minimum. A substantial fraction of time should be
devoted to the discussion of cases and of readings.
Grading
Cases (40%), classe participation (10%) and a final exam (50%). Cases should be prepared in
groups (4 students maximum per group). A 2-pages solution should be handed in before the
discussion of the case for 4 of the cases that we will discuss.
Course outline
1. We March 1 - 9AM-12AM (3 hours)
Foundations: portfolio theory, CAPM
Case : Partners Healthcare
Readings: BKM 7, 8, RWJ 9, 10
Ibbotson and Kaplan, Does Asset Allocation Policy Explain 40, 90 or 100 Percent of
Performance, Financial Analyst Journal, Jan/Feb 2000
2. Tu March 2 - 9AM-12AM (3 hours)
Market efficiency, ,Performance evaluation
Case: Fidelity, Janus, Vanguard: A tale of 3 funds
Readings: BKM 4, 12, 24 RWJ 13
Malkiel, Returns from Investing in Equity Mutual Funds 1971 to 1991 Journal of Finance,
50, 2 (June 1995)
3. Tu March 7 - 9AM-12AM (3 hours)
Fixed Income
Case: Banc One Corporation: Asset and Liability Management
Readings: BKM16, RWJ 25.5, 25.6
Lodge, R. The Geometry of Commercial Bank Balance Sheet Management in Beaver and
Parker, ed., Risk Management: Problems and Solutions, McGrawHill 1995
4. Mo March 13 - 9AM-12AM (3 hours)
Using Futures
Case: Smith Breeden Associates: The Equity Plus Fund (A)
Readings: BKM 22, RWJ 25.1-25.4
Introduction to Derivative Instruments Harvard Business School 9-295-141
5. Mo March 20 2PM-4PM (2 hours)
Using options
Case : The Keller Fund’s Option Investment Strategies)
Readings: BKM 20, 21 RWJ 20, 21
Farber, A. Cooking with Black and Scholes, Teaching note
6. Tu March 21 2PM-5PM (3 hours)
Structured products
Case : RevConv#21
Readings:
Farber, A. The Binomial Option Pricing Model, Teaching note
7. We March 22 9AM-12PM (3 hours)
Hedge Funds
Case: Pine Street Capital
Readings:
Fung and Hsieh, A primer on hedge funds, Journal of Empirical Finance 6 (1999)
8. Tu March 28 9AM-12AM (3 hours)
Credit Derivatives
Case: Emergence of Default Swap Index Products
Readings:
Note on Credit Derivatives, Harvard Business School 9-205-111