This lesson examines the measurement and management of portfolio risk and the evaluation of portfolio performance.

7.1 Risk Management
Risk management is a core objective of portfolio management. The University of Edinburgh syllabus identifies “trading, risk management, and alternative investments” as core topics . This involves:

  • Identifying and measuring portfolio risk (e.g., VaR).

  • Implementing strategies to mitigate risk through diversification and hedging.

  • Understanding the interplay between market participants and implications for financial markets .

7.2 Performance Measurement
Performance measurement assesses the return generated by a portfolio. The Regent’s University module covers “performance measurement” as a core topic . Key metrics include:

  • Sharpe Ratio: Measures risk-adjusted return.

  • Treynor Ratio: Measures return per unit of systematic risk.

  • Alpha: Measures the excess return relative to a benchmark.

7.3 Performance Attribution
Performance attribution decomposes the portfolio’s return into the contribution of asset allocation and security selection decisions.

7.4 Ethical and Responsible Investing
Ethical issues are increasingly part of investment decision-making. The University of Edinburgh module covers “ESG Investing” as a core topic . The MMI Essentials program also covers the “human side of investing” and “building trust expertise” .

PreviousNext