Checking date: 08/04/2019


Course: 2019/2020

Business and Finance II: Assessment of Financial Assets
(16260)
Study: Master in Industrial Economics and Markets (270)
EPC


Coordinating teacher: BALBAS DE LA CORTE, ALEJANDRO

Department assigned to the subject: Department of Business Administration

Type: Compulsory
ECTS Credits: 6.0 ECTS

Course:
Semester:




Students are expected to have completed
There are no requirements for students with appropriate grade (Economics, Finance, Science, Engineering).
Competences and skills that will be acquired and learning results.
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.
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
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 and the academic weekly planning may change due academic events or other reasons.