Practice of Risk Management and Investing

Undergraduate / Graduate

Principles and practices for financial decision-making under uncertainty. This course provides a foundational understanding of investment strategies and risk management. It is designed to give a perspective on the complexities surrounding financial decision making amidst uncertain market conditions. Students will learn about different types of risks that impact investments, and best practices for risk management under a range of real market conditions, always under the foundations of a robust theoretical framework. We will draw insights from real market events that have significantly influenced the investment landscape, such as the financial crisis of 2008-2009, the pandemic of 2020 and other ruptures that impacted markets in the past. Once familiarized with concepts in investing such as portfolio response to risks, yield curves, credit risk, tail and normal risks, and portfolio diversification, the class will be divided in teams to "play" a portfolio challenge game. Teams will manage a portfolio of bonds and navigate it as market conditions are perceived to change, protect the portfolio against market downturns and produce the best possible return at the end of the market cycle. The market conditions in this game are real, and we will be able to, together, appreciate the difficulties in forecasting the future of markets and manage investment risks under real uncertainties.