Essays in Portfolio Management:  

An Interactive e-book, powered by Maple 

 

Eliezer  Z. Prisman  

 

Copyright (c) 2007  Eliezer  Z. Prisman 

  

Copyright and Disclaimer  

TABLE of CONTENTS 

Only links in this color are alive.

Preface 

How to read the e-book 

Possible use of the e-book in the classroom 

Acknowledgements 

Chapter 1: Introduction 

1.1   Review time value of money Certainty vs. Uncertainty 

1.2   Modeling the consumer / investor decision process 

1.2.1  The Constraints 

1.2.2  The Consumer's Preferences 

1.2.3 The Consumer's Decision 

1.3   Introduction to Utility Analysis 

1.3.1 Utility and Uncertainty 

1.4   Saving vs. Investment 

1.5   A rigorous formulation of agents' decision 

1.6   Determining the equilibrium rate of interest in a simple economy 

1.7   Concluding Remarks 

1.8   Questions and Problems 

1.9   Appendix 

 

Chapter 2: Portfolio Choice under Uncertainty: The mean variance framework 

2.1   Preliminaries 

2.2   The Feasible Set in an Uncertain Environment: A First Look 

2.3   Review: Variance, Covariance, VarCov Matrix and Correlation Coefficient 

2.4   The Feasible Set with Two Assets 

2.5   The Feasible Set: A General Formulation 

2.5.1   Short sales allowed without a risk free asset 

2.5.2   Short sales allowed with a risk free asset. 

2.5.3 Short sales not allowed with and without a risk free asset. 

2.6   Concluding Remarks 

2.7   Questions and Problems 

 

Chapter 3: The Capital Asset Pricing Model (CAPM) 

3.1 Introduction 

3.2 Mean Variance and Utility representation 

3.3 Choosing The Optimal Portfolio 

3.4 The CAPM as an equilibrium model  

3.5 The Security Market Line (SML) 

3.6 Concluding Remarks 

3.7 Questions and Problems 

 

 

Chapter 4: Single and Multi-Index Models 

4.1   Introduction 

4.2   The Single Index (SIM) 

4.3   The Market Model 

4.4   SIM, Constant Correlation and the Efficient Frontier 

4.5   Multi-Index Model (MIM) 

4.6   Concluding Remarks 

4.7   Questions and Problems  

 

Chapter 5: Arbitrage Pricing Theory (APT) 

5.1  Introduction 

5.2   The APT Model 

5.3   The Intuition behind the APT 

5.4  Linear Programming and Arbitrage 

5.5   An Example 

5.6  Concluding Remarks 

5.7 Questions and Problems 

 

Chapter 6: Safety First Models 

6.1 Roy's Criterion 

6.2  Kataoka's Criterion 

6.3 Tesler's Criterion 

6.4  The Geometric mean Criterion 

6.5  Concluding Remarks 

6.6  Questions and Problems 

6.7 Appendix