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EDHEC-Risk Executive Education

EDHEC-Risk Institute Executive MSc in Risk and Investment Management - Core Courses

Core Courses

Core courses train participants to appreciate recent and forthcoming paradigm shifts in investment management and equip them with the conceptual and practical tools required to optimise risk and investment management and design novel investment solutions for institutional, private and retail investors that span traditional, alternative, and structured forms of investments. All core courses are mandatory.

  • State-of-the-art investment management (28 hours)

    The course discusses the organisation of the investment management process by reviewing competing investment models and examining the paradigm shifts in investment management and their impact on the organisation of the investment process. It establishes the framework of the investment management process and looks at recent and emerging models in institutional investment, wealth management, and retail asset management organisations, assessing academic recommendations and detailing innovations in architecture and solutions pioneered by world-class buy- and sell-side institutions. It discusses the benefits, limits, and implementation conditions of advanced quantitative models for asset allocation and risk management. The course combines analysis by EDHEC-Risk Institute researchers and dialogue with high-level practitioners to equip participants with a sound understanding of alternative investment processes and organisations and best industry practices as well as insight into upcoming changes.

  • Foundations of asset pricing and portfolio management (42 hours)

    This course introduces the economic and mathematical foundations of asset pricing and portfolio management. It opens with a review of the mathematical tools required for continuous-time models of security prices and interest rates and surveys the economic fundamentals for the study of individual decisions and market equilibrium. It then looks at consumption and investment under uncertainty, mean variance theory and alternative risk measures, capital market equilibrium, arbitrage pricing theory, derivatives pricing, interest rate models and the pricing of interest rate sensitive claims, and hedging.

  • Empirical finance (42 hours)

    This course focuses on the empirical aspects of asset pricing and portfolio management and on the econometrics of financial markets. Applications span primitive and derivative asset pricing, strategic and tactical asset allocation, and trading strategies. Topics covered include asset return modelling and predictability, volatility modelling and forecasting, treatment of non-linearity in data, simulation methods, calibration and testing of pricing models and trading strategies, correlation and co-integration analysis, econometrics of derivatives pricing, and econometrics of fixed income markets.

  • Alternative investments (28 hours)

    This course looks at alternative investments from an asset allocation perspective. It opens with a presentation of assets from private equity and real estate, to hedge funds, commodities and managed futures, and alternative alternatives (infrastructure assets, timber, etc.). The emphasis is on investment characteristics, risk and return drivers, and statistical properties of alternative classes and investments. The course then looks at the benefits and challenges of integrating alternative assets in asset allocation and discusses alternative integration models. It concludes with an examination of practical portfolio management issues that arise with alternative assets, and provides techniques to manage asset class exposure and operational risk.

  • Strategic asset allocation and asset-liability management (28 hours)

    This course deals with strategic asset allocation for mass-affluent, high net-worth and institutional investors and introduces the ALM framework. The first part of the course reviews the steps to developing an investment policy statement highlighting major considerations for the different types of investors. The course then discusses asset class specification and selection, and looks at the various methods used to estimate and model long-term returns, risks, and relationships between classes. It concludes with a review of the various approaches to combining investor objectives, constraints and asset class forecasts. The second part of the course focuses on the ALM approach to strategic asset allocation. It covers basic ALM approaches, surplus optimisation techniques, liability-driven investing, and stochastic ALM models and looks at the limitations, costs, and benefits of each approach. It reviews the practical issues of hedging hedgeable and imperfectly hedgeable risks with cash and derivatives and discusses short-term constraints on optimal ALM. It discusses liability identification and concludes with a series of case studies highlighting the salient features of implementing ALM in banks, insurance companies, and pension funds and introducing extensions of the ALM approach into private banking and sovereign investment management.

  • Portfolio construction and risk budgeting in practice (28 hours)

    This course is devoted to bridging the gap between portfolio theory and practical portfolio construction and building viable, stable, and realistic portfolio models. It looks at feasibility and relevance issues with traditional portfolio models, introduces techniques to redefine the investment universe and make covariance matrix estimation feasible, improve parameter estimates, address data limitations, and deal with illiquid asset classes. It presents methods to implement alternative portfolio models that account for non-normality risks, estimation error and parameter uncertainty, prior knowledge, realistic risk preferences, and transaction costs. It discusses scenario optimisation and its applications. It reviews risk budgeting in the core-satellite investing model, benchmark-relative optimisation, and concludes with a survey of the limitations of traditional indices and benchmarks and a discussion of alternative weighting schemes.

  • Risk measurement and management (49 hours)

    The course presents the tools used to identify, measure, and manage market risk, credit risk, operational risk, and liquidity and execution risk. It deals with the whole range of assets and devotes specific attention to the risks associated with derivatives and complex strategies. Its coverage of market risk includes alternative risk metrics, the Value-at-Risk framework and extensions, risk factor mapping, modelling of time-varying volatility and volatility clustering, and approaches to modelling extreme values. Its survey of credit and counterparty risks discusses default, downgrade, and credit spread risk, methods for credit risk measurement, tools for modelling of loss and recovery risks, traditional credit risk management methods, and credit derivatives. Treatment of operational risk encompasses a review of its various dimensions and presentation of the tools to measure, model, and mitigate operational risk, including specific controls, insurance, swaps, and catastrophe instruments. The course’s review of liquidity risk centres on identifying its sources, presenting mitigation techniques, designing liquidity provision plans and execution strategies. The course concludes with a survey of stress tests looking at their objectives and presenting steps and tools for designing and performing them.

  • Tactical asset allocation (21 hours)

    This course explores the models, techniques, and applications of tactical asset allocation. The course opens with a review of the various approaches to tactical asset allocation, introduces commonly used signals and their corresponding horizons, looks at the different types of parametric and non-parametric models used to generate and filter signals, and discusses portfolio construction issues. It then focuses on the econometrics of tactical asset allocation, addressing practical issues such as variable identification and model calibration, and out-of-sample performance testing and model training. It examines the specific characteristics of tactical asset allocation in a high frequency context. The course concludes with case studies of momentum-based tactical asset allocation in the commodity futures markets, business cycle analysis-based timing between traditional classes, and quantitatively-driven multi-style multi-class tactical asset allocation.

  • Dynamic asset allocation and risk management (14 hours)

    This course examines portfolio insurance techniques and introduces a new framework for dynamic asset allocation decisions in asset management and ALM that blends active management and risk management. It first looks at the introduction of risk management constraints into asset allocation and discusses time- and state-dependent strategies for risk management. It contrasts constant proportion portfolio insurance and option-based portfolio insurance. It then discusses principles, derivation, and implementation of the dynamic core-satellite model and shows how to use it to blend active management and risk management to engineer new risk-controlled strategies in asset management and ALM.

  • Structured investments (28 hours)

    This course explores structured products – as derivatives-based strategies involving the performance of one or several underlying assets (real assets, equities, indices, funds, etc.) and packaged as easily accessible buy-and-hold investment vehicles – focusing on the investor’s point of view. It opens with a presentation of the main types of credit, fixed-income, and equity derivatives structured products, detailing their risk and return profiles. It looks at the design, pricing, and hedging of the most common structures, e.g. capital protection, leverage, inverse indexation, and discusses exotic and customised structures. The course then reviews the tools and methods used to assess the performance and risks of structured investments and applies them to the analysis of products linked to equity, fixed-income, and alternative investments. It concludes with a look at the benefits and constraints of structured investments in terms of asset allocation and risk management.

  • Performance measurement, analysis and reporting (21 hours)

    This course introduces participants to the metrics, models, and rules to measure the performance of investment management, attribute it to investment process decisions and managers, and report it according to global standards. The course presents standard metrics for performance measurement and advanced models for risk-adjusted performance analysis of asset management and ALM. It addresses issues such as data biases, style biases, and dynamic trading, to provide for reliable performance measurement and analysis in a multi-style multi-class dynamic framework. It deals with the specific characteristics of performance analysis for equity, fixed income, derivatives and alternative investments. It concludes with a review of Global Investment Performance Standards and their compliance requirements.