MITx: Foundations of Modern Finance II course Syllabus

Overview: This course offers a rigorous, theory-driven exploration of modern finance, focusing on portfolio management, asset pricing, and risk-return trade-offs. Designed for learners with foundational knowledge in finance and quantitative reasoning, it spans approximately 12–16 weeks of part-time study, requiring 8–10 hours per week. Through structured modules, you’ll master core financial models like CAPM, mean-variance optimization, and the Security Market Line, building analytical skills essential for advanced finance roles and certifications.

Module 1: Risk and Return Fundamentals

Estimated time: 30 hours

• Understanding the relationship between risk and expected return
• Differentiating systematic vs. unsystematic risk
• Measuring risk using variance, covariance, and correlation
• Principles of diversification and risk reduction

Module 2: Portfolio Theory and Optimization

Estimated time: 40 hours

• Introduction to the Efficient Frontier
• Mean-variance optimization techniques
• Constructing efficient investment portfolios
• Impact of investor risk preferences on portfolio selection

Module 3: Capital Asset Pricing Model (CAPM)

Estimated time: 40 hours

• Core concepts of CAPM in financial economics
• Understanding beta and market risk premium
• Calculating expected asset returns using CAPM
• Interpreting the Security Market Line (SML)

Module 4: Applications and Advanced Topics

Estimated time: 30 hours

• Evaluating portfolio performance metrics
• Exploring market efficiency and its implications
• Introduction to behavioral finance considerations
• Applying financial models to real-world investment scenarios

Module 5: Final Project

Estimated time: 20 hours

• Construct and optimize a sample investment portfolio
• Analyze risk-return trade-offs using CAPM and SML
• Submit a comprehensive report with performance evaluation

Prerequisites

• Basic understanding of finance principles
• Familiarity with algebra and statistical concepts
• Previous exposure to financial markets recommended

What You'll Be Able to Do After

• Explain the theoretical foundations of portfolio management
• Apply CAPM to estimate expected returns and assess risk
• Construct and optimize portfolios using mean-variance analysis
• Evaluate investment performance using quantitative metrics
• Prepare effectively for CFA exams and advanced finance study