This unit examines the fundamental principles of investment analysis and the management of alternative investments available in the financial markets. Students will learn how to construct an optimal portfolio that achieves efficient diversification across asset classes and to invest in traded securities on the Australian Securities Exchange. The capital asset pricing model and arbitrage pricing theory as well as the index and multi-factor models are introduced to measure the acceptable rate of return for an investment. Other related topics include the micro and macro approaches to security analysis; the implications of market efficiency and behavioural finance on investment strategies; and portfolio performance evaluation using various risk-adjusted measures. Finally, the use of derivatives to control risk and the valuation of options are also examined.