This course is designed to provide a sound foundation for the fundamental concepts in the theory and practice of investments. Students who master the course material will acquire the analytical tools and financial theory necessary for making investment decisions and understanding the paradigms by which financial securities are valued. It prepares the students for more advanced courses on the topics covered (e.g. Fixed Income, Derivatives, Portfolio Management). The course is highly quantitative and relies heavily on analytical tools and economic theory developed throughout. Students should be comfortable with probability, statistics and regression analysis. Use of a spreadsheet package such as Excel will be helpful for understanding the material. Some use of calculus and matrix algebra will also be required.
Overview of topics: Overview of financial markets; bond valuation; term structure of interest rates; bond portfolio management; equity valuation; asset allocation and the index model; capital asset pricing model; market efficiency, anomalies, and investment strategies; multi-factor models; portfolio performance evaluation; mutual funds, ETFs, and hedge funds; investment policy and the framework of the CFA Institute.
The course provides the participants with a sound understanding of financial decision-making in the multinational firm. Hence, the course is applied in nature. However, whilst the course is presented from a managerial perspective, decision making is approached using firmly established theories in economics and finance. The course can be broadly split into three parts. The first part examines international financial markets and the determination of exchange rates. In the second part we will consider the impact of exchange rates on the cash flows of firms. In particular, we will learn how to measure and manage (hedge) how different cash flows are exposed to unexpected changes in exchange rates. The third part of the course focuses on some traditional issues in finance such as capital budgeting, cost of capital, and investments in physical assets. However, we approach these issues from an international perspective.
Overview of topics: Introduction; The International Monetary System. Foreign Exchange Market. Forecasting Exchange Rates. Parity Relationships. Currency Futures and Options. Transaction (contractual) Exposure. Operating Exposure, Translation Exposure, and Hedging Decisions of a Multinational Corporation. Foreign Direct Investments, Political and Country Risks. International Capital Structure and the Cost of Capital. International Capital Budgeting.
The overall goal of the course it to provide the participants with a sound understanding of foreign exchange markets and their role for the economy. The course is relevant for decision making by investors in the international arena, policy makers and multinational firms. The economy is becoming more and more international. This creates both opportunities and challenges for firms, investors and policy makers. A sound understanding of international markets is needed to deal with these opportunities and challenges. First, students learn about the history and organization of international financial markets, with special emphasis on the foreign exchange market. After that, the learning path proceeds along the different models for exchange rate determination, focusing especially on the macroeconomic determinants of exchange rates. Then, the main focus will move to issues in corporate finance, like capital budgeting, in an international setting. The second half of the course focuses more on the currency risk premia in order to understand exchange rates. Students will learn about the market microstructure approach to exchange rates, before going through different investment strategies involving exchange rates, and the existence and nature of risk premia in currency markets. Students will learn how to understand exchange rates through the lens of modern asset pricing.
Overview of topics: Background; International monetary system. Foreign Exchange Markets; International trade and capital flows; International markets for short-term debt instruments. Parity relations: Covered and Uncovered Interest Rate Parity; Purchasing Power Parity; International Fisher effect. Testing parity conditions. Exchange Rate determination. International capital budgeting. Capital structure and cost of capital. Foreign exchange microstructure: Dealer behavior, liquidity and price formation. Exchange rates, macro, financial intermediation and order flow. Explaining exchange rate movements. Carry trading and currency momentum. Creating and evaluating international investment strategies. Currency risk premia: sources and variation.
The purpose of this course is to provide students with an overview of finance from a managerial point of view. At the end of the course, students should be able to: Be knowledgeable about the universe of Finance: its language, its institutions, the problems it addresses and the solutions it proposes; Extract information from a company’s financial statements and use them to make informed financial decisions; Perform basic valuation analysis and understand the interaction between firm value and financial leverage.
Overview of topics: What Finance is about. Financial Markets. The time value of money. Basic Financial Mathematics. Present Value. From accounting statements to cash-flow. Sources and uses of funds. Working capital management. Capital Budgeting decisions. Net present value (NPV). Payback rule. Internal rate of return (IRR). Bond valuation. Stock valuation: the dividend growth model. Issuing securities to the public. Basic concepts in capital structure. Debt capacity. Limits to the use of debt.