Finance

Consideration of broad range of issues faced by corporate financial managers. Analysis of firm’s investment and financing decisions. Impact on firm of agency costs and asymmetric information. Study of mergers and acquisitions through use of empirical studies. Security design also covered.

Issues and analytical tools relevant for valuing projects, divisions and corporations. Theories of discounted cash flow valuation (DCF) and relative valuation using market multiples. Theories of practice to value different projects, including IPO, mergers and acquisitions, divestitures and private firms. Exploration of how real options affect investment decisions and how they can be identified and valued.

Study of the advantages and disadvantages of corporate mergers, acquisitions and other forms of restructuring. Both theory and empirical studies are reviewed. Considerable use of case studies and tests of merger performance.

This course emphasizes the financial, control and investment issues confronting rapidly growing companies in entrepreneurial settings. The main objective of the course is to consider and select financing vehicles that may be appropriate to securing the organization’s money requirements.

Topics covered include security valuation, application of portfolio theory to investment decisions and performance evaluation. Basics of fixed-income portfolio management strategies are also covered.

Introduction to fixed-income markets: institutional arrangements in primary and secondary markets; description and analysis of various types of fixed-income instruments; valuation; fixed-income portfolio management; use of derivative instruments and dynamic investment strategies; asset securitization.

The course deals with the organization and role of organized derivative markets, including listed and OTC options and futures: arbitrage and hedging relationships, valuation of derivative trading strategies, and innovations in derivative markets. Students learn fundamentals of hedging and spreading by playing an option trading game and writing a term paper analyzing their trading strategies.

Discussion of regulatory environment for both market and credit risk management, data necessary to manage these risks, types of models used for risk management, types of securities and techniques for hedging market and credit risks, performance measurement of risk management systems, and other types of risks that affect risk management, such as operation risk, liquidity risk, commodity risk, weather risk and model risk.

Introduction to and explanation of evidence of anomalous return behavior found in U.S. equities markets. Presentation of some paradigms of stock price movements that are rooted in studies from psychology and explanation of trading activity in equity risk-return paradigm. Introduction to some psychological biases that researchers suspect are inherent to investors. Employment of some results from psychology literature to explain irrationalities encountered in finance literature. Presentation of latest evidence on why individual investors trade and how individual and institutional investors form their portfolios.

Conceptual understanding of the foreign exchange market, the Euro-currency market, the international bond market, and equity markets in various countries. Emphasis is on underlying economic principles, although where relevant, institutional features helpful in understanding the structure and operations of the markets will also be dealt with in detail.

Use of cases to study entrepreneurial finance and venture capital. Analysis of issues faced by entrepreneurs who are setting up new firms, as well as decisions of private equity partnership managers and investors. How transactions are structured and why investors and entrepreneurs choose certain contractual arrangements. Development of understanding for institutional context of private equity finance.

Three important recent developments are about to drastically change how we think about money, contracts and trust: mathematics of cryptography, nearly zero cost communication using internet and decentralization of computing. Bitcoin is just the beginning. Smart contracts are next. Finance is about to undergo a revolution.