Fundamentals of Investments
This course covers the essentials of asset pricing and portfolio choice, standard discounted cash flow approaches, and no-arbitrage framework for valuing financial securities. Basic paradigms of asset pricing, such as capital asset pricing model (CAPM), arbitrage pricing theory (APT), and Fama-French Three-Factor model. Development and illustration of dynamic portfolio selection and optimization approaches. Letter grading.
An introduction to the concepts of financial accounting and its underlying assumptions including an examination of the uses and limitations of financial statements. Procedural aspects of accounting will be discussed in order to enhance understanding of the content of the financial statements. An emphasis is placed on using accounting information in the evaluation of business performance and risk. The use of accounting information in research studies will also be examined. Letter grading.
Lecture, three hours. Limited to Master of Financial Engineering Program students. An examination of basic macroeconomic theory and trends. Topics include: US recessions, the global financial crisis, fiscal and external sustainability analysis, currencies, and long term economic growth in the global economy. Students will learn how to access and organize web based global macroeconomic data. Letter grading.
Introduction to Econometrics
This course covers the theory and the in-depth application of linear regression. Topics include simple linear regression, multiple regression, prediction in multiple regression model, residual diagnostics, detection of outliers, and violations of stochastic assumptions. Letter grading.
Corporate Finance and Accounting
This course examines a broad range of issues faced by corporate financial managers including analysis of the firm's investment and financing decisions, the impact on the firm of agency costs and asymmetric information, mergers and acquisitions, private equity, and risk management strategies and tools.
Introduction to Stochastic Calculus
This course covers the economic, statistical, and mathematical foundations of derivatives markets. The course presents the basic discrete-time and continuous-time paradigms used in derivatives finance including an introduction to stochastic processes, stochastic differential equations, Ito's Lemma, and key elements of stochastic calculus. The economic foundations of the Black-Scholes no-arbitrage paradigm are covered including an introduction to Girsanov's theorem and changes of measure, the representation of linear functionals, equivalent martingale measures, risk-neutral valuation, fundamental partial differential equation representations of derivatives prices, market prices of risk, and Feynman-Kac representations of solutions to derivatives prices. The role of market completeness and its implications for the hedging and replication of derivatives will be covered in depth.
Empirical Methods in Finance
This course covers the probability and statistical techniques commonly used in quantitative finance. Students use estimation application software in exercises to estimate volatility, correlations, and stability.
Derivatives are both exchange traded and over-the-counter securities. The derivatives markets are the world's largest and most liquid. This course will focus on the organization and role of put and call option markets, futures and forward markets, and their interrelations. The emphasis will be on arbitrage relations, valuation, and hedging with derivatives. The course will also cover the implementation of derivatives trading strategies, the perspective of corporate securities as derivatives, the functions of derivatives in securities markets, and recent innovations in derivatives markets.
Computational Methods in Finance
This course covers the quantitative and computational tools used in finance. This includes introducing numerical techniques such the implementation of binomial and trinomial option pricing, lattice algorithms for computing derivative prices and hedge ratios, simulation based algorithms for pricing American options, and the numerical solution of the partial differential equations that appear in financial engineering.
Fixed Income Markets
This course provides a quantitative approach to fixed-income securities and bond portfolio management with a focus on fixed-income security markets. The course covers the pricing of bonds and fixed-income derivatives, the measurement and hedging of interest rate risk, dynamic models of interest rates, and the management of fixed income portfolio risk.
Quantitative Asset Management
This course emphasizes the application of state-of-the-art quantitative techniques to asset management problems. The course covers asset pricing models in depth, portfolio optimization and construction, and dynamic strategies such as pairs trading, long-term and short-term momentum trades, and strategies that address behavioral finance anomalies. The course also discusses major forms of asset management structures such as mutual funds, hedge funds, ETFs, and special investment vehicles, and examines some of the primary types of trading strategies used by these organizations.
Financial Risk Measurement & Management
This course examines financial risk measurement and management, including market risk, liquidity risk, settlement risk, model risk, volatility risk, and kurtosis risk.
Applied Finance Project
Every MFE student is required to complete an applied quantitative finance project that explores a quantitative finance problem that might be met in practice and involves the development or use of some of the tools developed in the MFE Program. Participation requires prior approval of the project by the supervising faculty member.
This course provides an introduction to the building and implementation of credit models for use by financial institutions and quantitative investors. The course covers the basics of corporate debt securities and provides an in-depth introduction to the credit derivatives markets. Structured credit products such as cash and synthetic collateralized debt obligations (CDOs) are discussed.
Special Topics in Financial Engineering
2 courses offered. Special Topics courses consist of an in-depth examination of problems or issues in an area of current concern in financial engineering. Past topics have included Asset Backed Securities Markets,Statistical Arbitrage and Behavioral Finance.
Financial Institutions Seminar
These noncredit seminars on financial institutions consist of a series of presentations by various practitioners on topics related to the practice of financial engineering. Examples of topics covered include discussions on how risk management is implemented at various investment banks, on how quantitative asset management is performed at equity and fixed income investment firms, and on current trends in the use of quantitative analysis and techniques among hedge funds and other institutional investors.