Financial Economics and Asset and Liability Modelling

This MA535/MA85 assessment wasn’t just about numbers on a page; it was a thrilling detective hunt through the labyrinthine world of finance. Fueled by curiosity and armed with the tools of modern portfolio theory (MVPT) and the Capital Asset Pricing Model (CAPM), I embarked on a mission to uncover the secrets of optimal investment strategies.

My first stop was the bustling marketplace of historical data. Tracking down crucial details on Lion Electric Co., American Airlines, and New Germany Fund, I meticulously pieced together their price histories, searching for hidden patterns and revealing their interdependencies. From calculating daily returns and their volatile dances to untangling the web of covariances and correlations, I built a map of their intricate relationships.

Next, I donned the mantle of a portfolio architect, wielding MVPT as my blueprint. Balancing risk and reward with precise calculations, I explored a universe of potential investments. Using Data Tables and scatter plots as my tools, I charted the efficient frontier, that elusive border between risk and return. Finally, with precision and analysis, I pinpointed the holy grail – the minimum variance portfolio, the crown jewel of diversification.

With CAPM, I ventured into the murky waters of market equilibrium. Analyzing economic assumptions and their delicate balance, I explored the forces shaping the financial landscape. Calculating expected returns and standard deviations, I predicted the future movements of the market with newfound confidence. Finally, I unraveled the security market line, a roadmap for navigating the optimal risk-return combinations within the market.

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