Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
EMSE 6450: Investment Engineering
Instructor Information: Dr. J. René van Dorp, Professor
Office Address: SEH Building, 800 22nd Street, Office 2800, Washington DC 20052
Telephone Number: 202-994-6638
E-mail: dorpjr@gmail.com
Office Hours: Wednesday 2:00PM to 4:00PM
Class Meets at: TOMPKINS HALL 406
Wednesdays 6:10PM – 8:40PM
Text Book: Leunberger’s book entitle “Investment Science”, 2nd Edition
http://www.amazon.com/Investment-Science-David-G-Luenberger/dp/0199740089
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
Course Description:
” Investment theory currently commands a high level of intellectual attention – fueled in part by some extraordinary
theoretical developments in finance, by an explosive growth in information and computing technology, and by the global
expansion of investment activity. Recent development in investment theory are being infused into university class rooms, into
financial service organizations, into business ventures, and into the awareness of many individual investors” - Luenberger
(1998). This course accompanied by Leuberger’s (1998) book entitled “Investment Science” is intended
to be one of the instruments to get these ideas across. The course emphasizes fundamental
mathematical principles and how literacy in these principles allows one to solve practical investment
problems. The course follows the first three parts of Leunberger’s (1998) book closely, i. e.: (i)
Deterministic Cash Flow Streams, (ii) Single Period Random Cash Flows and (iii) Derivative Securities.
Prerequisites:
EMSE 6115 (or APSC 3115) and EMSE 6410
and a working knowledge of Microsoft Excel.
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
The course is designed for individuals with a technical background at the level of a
bachelor’s degree in engineering, mathematics or science. The language of
investment science is predominantly mathematical. However, the mathematics used
in this course is not complex – only elementary portions of calculus are required –
but students must be comfortable with the use of mathematics as a method of
deduction and problem solving.
Students with a solid grasp of algebra, analytic geometry and knowledge of
probability calculus equivalent to the level of an undergraduate probability and
statistics course will find some off the materials in this class more accessible.
Others at times may want to revisit some of these topics as needed.
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
Course Objectives:
Introduce students to investment analysis approaches to solve practical investment
decision problems.
Method of Instruction:
Book: "Investment Science", 2nd Edition
By: David G. Leunberger
Software: MicroSoft Excel.
Class Sessions:
Students will be assigned reading assignments which they are expected to read
before class. During class the material will be presented using lecture slides. A copy
of the slides may be printed from this site prior to class. Additional information
may be posted for individual class sessions. We shall use Microsoft Excel to
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
perform analysis during the class sessions and to solve homework problems.
During Class Sessions the only software programs that should be open on your
desktop are either Adobe Acrobat (for viewing the notes) or Microsoft Excel or
MINITAB for statistical analysis. During the class sessions (except for the
break of the course) a student is not to check his e-mail, the internet and
should not engage in instant messaging sessions. Basically, your attention
should be directed towards the class material.
Class Attendance + Homework:
Class attendance and Homework is considered to be a vital part of the course.
Homework sets will be assigned during the course. A selection of homework
solution will be discussed during class. A complete set of homework solutions of
those that were assigned will be posted on the class course page. Students are
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
encouraged to work together on the homework. However, each student is required
to hand in their own solution in their own words. Homework shall be graded on
effort only!
CLASS ATTENDANCE WILL BE TAKEN AT BEGINNING OF EACH
CLASS. HOMEWORK IS DUE ONE WEEK AFTER THEY HAVE BEEN
ASSIGNED. NO CREDIT WILL BE GIVEN TO ATTENDANCE OR
HOMEWORK RECORDED AFTER CLASS.
FINAL GRADE CALCULATION:
5% Class Attendance (Taken at the beginning of each class)
20% Homework (Will be graded on effort only)
35% Midterm Exam
40% Final Project + Report
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
The midterm exam is an open notes exam, not open book. The only Microsoft
Excel spreadsheet that a student can use during their exam is the template
spreadsheet provided by the instructor for the exam. In-class exams will make use
of lab computers or your laptop computers. The only software that is allowed to be
open on your desktop during the exam is Adobe Acrobat or Microsoft Excel. The
use of the internet, e-mail or instant messaging during the in-class exams
shall be considered a violation of academic integrity. Cheating will not be
tolerated, i.e. copying or looking on another student's paper during the midterm
exam, will not be tolerated. You are expected to work on your own on for the Final
Project + Report No solutions from previous EMSE 6450 classes may be used
for any part of a student’s work that is handed in for grading.
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
In the event of a violation of academic integrity action will taken in accordance
with the Academic Integrity Code: ACADEMIC INTEGRITY OFFICE, THE GEORGE
WASHINGTON UNIVERSITY, 609 22nd STREET, N.W. BLDG. AJ, WASHINGTON D.C. 20052.
THE ACADEMIC INTEGRITY CODE WAS DEVELOPED
BY THE STUDENTS AND THE FACULTY OF GW WORKING
TOGETHER IN 1995. BY ATTENDING GW EACH STUDENT
IS PART OF THIS TRADITION.
"THE RIGHT ANSWER COMES FROM YOU"
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
THIS SCHEDULE IS SUBJECT TO CHANGE, PLEASE CHECK WEB-SITE REGULARLY!
Session
Date
Reading Assigments 2n Ed.
(LN = Lecture Notes)
Class Topic
Homework Assignments
1st Edition Numbering
Homework Assignments
2nd Edition Numbering
2.4, 2.6, 2.8, 2.10
2.4, 2.8, 2.10, 2.12
DETERMINISTIC CASH FLOW STREAMS
1
1/13/2016
Cash Flow Streams and the Basic Theory of Interest
Chapters 1 - 2
2
1/20/2016
Fixed Income Securities - Part 1
Chapter 3
3.6, 3.10
3.8, 3.14
3
1/27/2016
Fixed Income Securities - Part 1
Chapter 3
3.12, 3.14
3.16, 3.18
4
2/3/2016
The Term Structure of Interest Rates
Chapter 4
4.2, 4.6, 4.11, 4.14
4.2, 4.6, 4.11, 4.16
5
2/10/2016
Applied Interest Rate Analysis - Part 1
Chapter 5
5.2, 5.7, 5.11
5.2, 5.7, 5.11
6
2/17/2016
Applied Interest Rate Analysis - Part 2, Midterm Review
Chapter 5
5.12
5.12
DEAN CANCELED CLASSES DUE TO SEAS R&D SHOWCASE
2/24/2016
7
3/2/2016
Exam 1 - Session 1 - 6
SINGLE PERIOD RANDOM CASH FLOWS
8
3/9/2016
Mean-Variance Portfolio Theory - Part 1
Chapter 6, Appendix A and B
6.2, 6.4, 6.6
6.2,6.4, 6.6
6.8, 6.7, 6.10
6.8, 6.7, 6.10
SPRING BREAK
3/16/2016
9
3/23/2016
Mean-Variance Portfolio Theory - Part 2
Chapter 6, Appendix A and B
10
3/30/2016
The Capital Asset Pricing Model
Chapter 7
EP Chapter 7, 7.2, 7.6, 7.8
EP Chapter 7, 7.2, 7.6, 7.8
11
4/6/2016
Chapter 8
8.1 ,8.2, 8.4
8.1, 8.2 8.4
12
4/13/2016
Chapter 9
8.5, 8.6
9.1, 9.2
13
4/20/2016
14
5/4/2016
Other Pricing Models + FINAL PROJECT PART I - Building a
Markowitz Efficient Frontier
Data and Statistics + FINAL PROJECT PART II - Constructing a
Market Index
Risk Measures + FINAL PROJECT PART III - Building a CAPM
Efficient Frontier
Chapter 10
FINAL REPORT DUE ON FINAL PROJECT
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Department of Engineering Management
and Systems Engineering
School of Engineering and Applied Science
Semester: Spring 2016
Syllabus: EMSE 6450
• Electronic copies of the lecture notes can be downloaded from my Faculty
web-page at: http://www.seas.gwu.edu/~dorpjr/EMSE292/Intro.html
• Please send me an introductory e-mail with subject “EMSE 6450 – Your
Name” so I can create an E-mail Class List.
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