Checking date: 24/04/2023

Course: 2023/2024

Business and Finance II: Assessment of Financial Assets
Master in Industrial Economics and Markets / Máster Universitario en Economía Industrial y Mercados (Plan: 378 - Estudio: 270)

Coordinating teacher: BALBAS DE LA CORTE, ALEJANDRO

Department assigned to the subject: Business Administration Department

Type: Compulsory
ECTS Credits: 6.0 ECTS


Requirements (Subjects that are assumed to be known)
There are no requirements for students with appropriate grade (Economics, Finance, Science, Engineering).
1)Capital markets equilibrium and its implications on pricing, hedging and market efficiency. 2)Pricing and hedging derivative securities. 3)Fixed income markets, interest rates and credit spreads.
Skills and learning outcomes
Description of contents: programme
1. Forward and Future Contracts Forward and Future Contracts. Spot and Future Prices. Arbitrage. Currencies and Dividends. Using Futures in Practice. Overcoming Market Imperfections. 2. Introduction to Option Markets Options (Calls and Puts, European and American Style), Premium (upper and lower bounds), Put-Call Parity, Strategies Involving Options. 3. The Black-Scholes Model General Assumptions. Delta-Strategies. The Black-Scholes Formula. Consequences. Applications in Practice. 4. The Black-Scholes Model (second part) Incorporating Dividends. Future Options. Pricing and Hedging more Complex Derivatives. 5. Term Structure of Interest Rates Pricing Fixed Income Securities. Spot Rates. Forward Rates. Understanding the TSIR (pure expectations, segmentation, liquidity preference). 6. Estimating the TSIR Practical methods to estimate the TSIR (McCulloch, Nelson-Siejel and Svensson methods). Credit risk, credit spread, credit spread estimations 7. Hedging the Interest Rate Risk Interest Rate Risk. Additive and non-Additive Shifts. Duration. Convexity. Immunization Theory. 8. More about Market Efficiency and Portfolio Choice Market efficiency, Markowitz model, efficient portfolios, the role of the riskless asset. 9. APT models Factors, regression models, betas, idiosyncratic and systematic risk. Hedging strategies, practical applications. 10. Capital Asset Pricing Model (CAPM) The market portfolio as a unique factor, idiosyncratic and systematic risk. consequences on portfolio theory, market equilibrium, practical applications empirical evidence.
Learning activities and methodology
Methodology: 1) Theoretical lectures 2) Practical lessons 3) Exercises 4) Reading and summarizing academic papers Furthermore, there will be an adequate timetable so as to allow students to discuss with the professor (three hours a week).
Assessment System
  • % end-of-term-examination 60
  • % of continuous assessment (assigments, laboratory, practicals...) 40

Calendar of Continuous assessment

Basic Bibliography
  • Brealey, R., S. C. Myers and F. Allen . Principles of Corporate Finance. McGraw Hill. .
  • Fabozzi, F. . Bond Markets, Analysis and Strategies. Prentice-Hall International, Inc. .
  • Hull, J. . Options, Futures and other Derivatives. Prentice-Hall International, Inc. .

The course syllabus may change due academic events or other reasons.

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