Portfolio and Risk Management

Go to Course: https://www.coursera.org/learn/portfolio-risk-management

Introduction

### Course Review: Portfolio and Risk Management on Coursera In the realm of finance, the mastery of portfolio construction and risk management is paramount for any aspiring investor or financial professional. Coursera’s course, **Portfolio and Risk Management**, offers a comprehensive exploration of these critical areas, weaving together theory and practice to equip learners with the skills necessary for effective investment management. #### Course Overview The **Portfolio and Risk Management** course provides a robust framework for understanding the intricacies of portfolio construction. Throughout the course, participants will delve into vital concepts such as optimal portfolio construction, the impact of asset correlations, and strategies for effective risk management. The course is divided into four focused weeks, each aimed at building a foundational and advanced understanding of financial portfolios. #### Syllabus Breakdown 1. **General Introduction and Key Concepts** In the opening week, learners are introduced to common pitfalls in portfolio management. The course emphasizes the foundational elements that inform optimal portfolio design: expected returns, risk, and asset dependence. This initial grounding is crucial for understanding the advanced concepts that follow. 2. **Modern Portfolio Theory and Beyond** Week two dives into Modern Portfolio Theory (MPT), elucidating how diversification can mitigate risks and enhance returns. Participants will learn about the significance of imperfect correlations between asset returns, which are key to creating effective portfolios. The course will also explore real-world applications of MPT and its evolution into the Capital Asset Pricing Model (CAPM), providing insights into fundamental investment strategies used by professionals. 3. **Asset Allocation** Asset allocation takes center stage in the third week. Students will gain insights into Strategic Asset Allocation (SAA) and its relationship with MPT, juxtaposing it with Tactical Asset Allocation (TAA). The course addresses how these strategies can be employed both separately and in conjunction, enabling students to create portfolios that align with specific investment goals while seizing market opportunities. 4. **Risk Management** The final week is dedicated to understanding and managing risk. This section highlights various sources of risk, including illiquidity and currency risk, while introducing essential risk assessment tools beyond the conventional standard deviation. Through concepts like Value-at-Risk (VaR) and Expected Shortfall, learners will develop a more nuanced understanding of risk measurement and hedging strategies. #### Why You Should Consider This Course **1. Expert-Led Learning:** The course is curated by experienced financial professionals who provide real-world insights, ensuring that you not only learn the theory but also how it applies to current market conditions. **2. Practical Applications:** With case studies and practical assignments, the knowledge gained can be immediately applied, allowing participants to see the impact of their learning in real-time scenarios. **3. Flexible Learning:** Offered on Coursera, the course allows you to learn at your own pace, fitting into your schedule without the pressure of traditional classroom settings. **4. Strong Foundations:** Whether you are a complete novice or someone looking to refresh your skills, this course provides a comprehensive approach to portfolio management and risk techniques that are essential for success in today’s financial landscape. ### Conclusion and Recommendation In conclusion, the **Portfolio and Risk Management** course on Coursera is an invaluable resource for anyone interested in enhancing their investment acumen. Its structured approach, from foundational theories like MPT to advanced risk management techniques, makes it a well-rounded program. I wholeheartedly recommend this course to finance students, budding investors, or professionals seeking to deepen their understanding of portfolio management and risk assessment. Embracing the knowledge and skills gained from this course can set you on a robust path towards becoming a proficient investor.

Syllabus

General Introduction and Key Concepts

In this introductory week, you will first be presented with a few mistakes you will no longer make after following this course. In order to avoid making these mistakes, you will start by gaining a foundation and understanding of the three main types of information we need in order to build optimal portfolios: expected returns, risk and dependence.

The focus of this second week is on Modern Portfolio Theory. By understanding how imperfect correlations between asset returns can lead to superior risk-adjusted portfolio returns, we will soon be looking for ways to maximize the effect of diversification, which is at the heart of Modern Portfolio Theory. But we won’t stop there: we will also explore the implications of Modern Portfolio Theory on real-world investment decisions and whether or not these implications are followed by investors. Finally, we will see how Modern Portfolio Theory can be built upon to derive the most popular asset pricing model: the Capital Asset Pricing Model.

This third week is dedicated to asset allocation. After a short introduction to investor profiling, we will delve into Strategic Asset Allocation (SAA). You will see how it relates to Modern Portfolio Theory and how it differs from Tactical Asset Allocation (TAA). We will look at how both asset allocations can be implemented separately but also in conjunction in order to build portfolios that fulfill investors’ needs and constraints while taking advantage of market opportunities.

This fourth and final week is dedicated to risk. We will start by looking in more depth at different sources of risk such as illiquidity and currency risk but also at the different tools available to investors to perform risk management. But how should we measure risk? We will see that it may be valuable to go a step beyond standard deviation, the risk measure we used so far, and look at the Value-at-Risk and Expected Shortfall which focus on potential large losses. Finally, we will use the financial instruments at our disposal to hedge market and currency risk.