This information is for the 2020/21 session.
Dr Dong Lou and Dr Igor Makarov
This course is compulsory on the MSc in Finance (part-time). This course is not available as an outside option.
Aimed at people with a good undergraduate degree and good quantitative skills, with some knowledge of economics.
- Investments and Securities Valuation
- Portfolio choice and performance evaluation
The aim of the course is to familiarize students with the workings of financial markets, and equip them with the fundamental tools of asset valuation. The course will focus on the three main asset classes - fixed income, stocks, and derivatives - giving a unified perspective of modern valuation methods. The starting point will be the present value formula. The course will then proceed to fixed-income securities, focusing mainly on government bonds. These will be valued off the term structure of interest rates, using the present value formula. The connection with the principle of no-arbitrage will be emphasized. The course will then move to stocks, starting with portfolio theory and then deriving the relation between risk and return (CAPM). The CAPM will provide a risk-adjusted discount rate that will be used to discount stocks' cash flows with the present value formula. Alternative pricing models such as the APT and multi-factor models will also be covered, and the models will be applied to issues of asset allocation and portfolio selection. The last topic will be derivatives, especially futures and options. After familiarizing students with the use of derivatives, the course will cover the main valuation methods (binomial model, Black-Scholes) emphasizing again the principle of no-arbitrage.
30 hours of lectures in the MT. 30 hours of lectures in the LT.
This course is taught in the interactive lecturing format. There is no distinction between lectures and classes/seminars; there are “sessions” only, and the pedagogical approach in each session is interactive.
Regular classworks will be completed, handed in and marked as part of formative assessment for this course.
The organisation of topics of the course follows closely the treatment in Berk and DeMarzo, Corporate Finance, 3rd Global Edition, Pearson International, and Bodie, Kane, and Marcus, Investments, 10th Edition, McGraw Hill. Other recommended readings and case studies will be included in a study pack.
Continuous assessment (100%) in the MT and LT.
Important information in response to COVID-19
Please note that during 2020/21 academic year some variation to teaching and learning activities may be required to respond to changes in public health advice and/or to account for the situation of students in attendance on campus and those studying online during the early part of the academic year. For assessment, this may involve changes to mode of delivery and/or the format or weighting of assessments. Changes will only be made if required and students will be notified about any changes to teaching or assessment plans at the earliest opportunity.
Total students 2019/20: 47
Average class size 2019/20: Unavailable
Controlled access 2019/20: Yes
Value: One Unit