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Foundations of Corporate Finance Undertake in-depth analysis of the key determinants of the investment and financing decisions of the firm. Topics covered include: Capital budgeting; capital structure; dividend policy; mergers and takeovers. Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark, and a two-hour examination in the first week of Term 2 (January) equivalent to 80%. Economics of Financial Markets Learn the basic tools of economic analysis, and gain an understanding of policy issues relevant to financial markets and the economic context within which they operate. Study the basic tools of microeconomic analysis and modern macroeconomic theory. Topics covered include: Consumption and production theory and general equilibrium; strategic interaction; asymmetric <strong>information</strong> and agency problems; The ISLM model; monetary and fiscal policy; credibility and the role of expectations; The Yield Curve and the stock market; Dynamic ISLM. Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark and a two-hour examination in the first week of Term 2 (January) equivalent to 80%. Quantitative Methods for Finance Explore the basic tools for quantitative analysis of the financial markets and learn the quantitative skills you will need for other modules such as, for instance, Asset Pricing and most importantly, Empirical Finance. The first two lectures of the module are an introduction to statistics. The remaining lectures cover the material corresponding to a sound introduction to econometrics. Topics covered include: Statistics: sampling, sampling distributions, point estimation, confidence intervals, hypothesis testing; linear regression model, estimation and inference; departures from the classical linear model assumptions: multicollinearity, heteroscedasticity, autocorrelation; model specification and diagnostic testing; introduction to time series econometrics. ARMA models; trends and cointegration analysis. Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark and a two-hour examination in the first week of Term 2 (January) equivalent to 80%. CORE MODULE – Term 2 Empirical Finance Gain an understanding of the theory and practice of financial econometrics with lectures covering theory as well as empirical applications. Your practical skills will be further developed in computer-lab based seminars. Topics covered include: Introduction to the statistical framework for empirical modelling of financial time series; stationary processes; of nonstationary processes; non-linear models, including models of time varying risk, with applications in risk management. Applications will include the empirical testing of asset pricing models such as CAPM, portfolio allocation, forecasting, yield curve modelling and nonlinear adjustment in foreign exchange markets; Efficient Market Hypothesis (EMH). Assessment consists of two module tests worth 20% each, one group project worth 20%, and a one-hour exam in Term 3 (April/May) worth 40%. ELECTIVE MODULES Term 2 You will choose three elective modules from the modules listed below. This is an indicative list only; further <strong>information</strong> and confirmation of the available electives is provided at the end of Term 1.
Advanced Corporate Finance Explore the basic issues in mergers and acquisitions (M&As) and undertake in-depth analysis of the key determinants of M&A activities of firms around the world. Consider the wider issues of agency problems and corporate governance that are associated with M&A activities. Topics covered include: Value creation in takeovers; abnormal returns; merger waves; private equity; merger arbitrage; takeover defenses; costs and benefits of concentrated ownership; modeling the takeover process. Assessment consists of coursework worth 40% of the final mark and a 1 ½ hour examination in Term 3 (April/May) equivalent to 60%. Behavioural Finance Psychologists working in the area of behavioural decision-making have produced much evidence against the adequacy of neoclassical economics. Behavioural finance comprises financial analysis which relaxes some of these assumptions. It is a paradigm where financial markets are studied using models that are less narrow than those based on von Neumann-Morgenstern expected utility theory and arbitrage assumptions. Topics covered include: Market Efficiency; Prospect theory; Loss aversion; the impact of Knightian uncertainty; limits to arbitrage; overconfidence in financial markets; herding and asset bubbles; paradoxes and anomalies; the disposition effect; investor sentiments. Assessment consists of a two-hour examination in Term 3 (April/May) equivalent to 70% of the final mark and coursework worth 30%. Derivative Securities Explore the rich variety of derivative contracts that exist, the ways in which they may be used and the models that can be used to determine their prices. Although the module covers both theory and application, it does not require a particularly high level of mathematics. Much of the development for options pricing is based on binomial trees. The module has relevance both for potential users of derivatives and for those who need to understand risk management using derivatives. Topics covered include: Arbitrage and futures prices; bounds on option prices; binomial models for options; Black/Scholes model for options and its applications; hedging with futures and options; stock-index options and portfolio insurance; interest-rate futures and swaps; warrants and convertibles; exotic options. Assessment consists of a module test worth 20% of the final mark and a two-hour examination in Term 3 (April/May) equivalent to 80%. Financial Engineering and Structured Products Examine recent developments in financial engineering and structuring and apply your learning to real world problems and situations. Deepen your knowledge of particular areas that are at the forefront of academic research in derivative markets. As this is a highly quantitative module an advanced level of mathematics is required; it is particularly suitable if you have an undergraduate degree in mathematics. Topics covered may include: Modelling of volatility and correlation and derivative products based upon them; the pricing of derivatives on commodities and other non-financial underlying variables; the pricing and hedging of exotic options; study of a Ponzi scheme; client conflicts in designing a collateralised debt obligation. Assessment consists solely of a 3,000 word project. Financial Reporting and Financial Statement Analysis
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