Unit – 1
Session No. 7
Topic: Role of Portfolio Management

• Recap the Previous Session
• Role of Portfolio Management
• Future role of Portfolio Management
• Ethical responsibilities for portfolios

• What are the factors influence the investment choice?
• What is liquidity risk?
• What is time risk?
• How to choose term investments?
• How does time, tax are constraint the investors’ asset allocation?

• Portfolio prioritization and selection
• Stakeholder management
• Risk management
• Resource planning
• Value assessment and benefits realization

THE FUTURE OF PORTFOLIO MANAGEMENT
• Portfolio Management has become a more science-based discipline
• Advances in basic theory, technology, and market structure constantly translate into improvements.
• Theoretical advances in investments
• Technical Analysis in Portfolio Selection and Asset
Allocation

THE FUTURE OF PORTFOLIO MANAGEMENT
• Significant recent theoretical advances in investments is the recognition that the risk characteristics of the non-tradable assets owned by an individual client, such as future earnings from a job, a business, or an expected inheritance, should be included in the definition of that client’s portfolio.
• In the institutional area also, there is an increasing awareness and use of multifactor risk models and methods of managing risk.

THE FUTURE OF PORTFOLIO MANAGEMENT
• Among the most significant market developments is the emergence of a broad range of new standardized derivative contracts—
– swaps, futures, and options.

THE FUTURE OF PORTFOLIO MANAGEMENT
• Swaps
– Swaps refers to an exchange of one financial instrument for another between the parties concerned. This exchange takes place at a predetermined time.
– For example, in the case of a swap involving two bonds, the benefits in question can be the periodic interest (coupon) payments associated with such bonds.

THE FUTURE OF PORTFOLIO MANAGEMENT
• Futures
– a futures contract (more colloquially, futures) is a contract between two parties to buy or sell an asset for a price agreed upon today (the futures price) with delivery and payment occurring at a future point, the delivery date. Because it is a function of an underlying asset, a futures contract is considered a derivative product.

THE FUTURE OF PORTFOLIO MANAGEMENT
• Options
– An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties.

Ethical Responsibilities of a Portfolio Manager
• Professional standards for managers
– Standards of competence and
– Standards of conduct
• Connection to individuals and their welfare is always present
• Code of ethics

• What is Futures?
• What is Options?
• What is Swaps?
• What is Professional Standards?
• What is code of ethics?