The overarching goal of this class is to develop a framework for making investment decisions. Example questions we will tackle: What is diversification? Can adding a volatile security reduce overall portfolio volatility? Why do most fund managers underperform indexes? And, what are potential ways to beat an index? We will study theory, empirical evidence, and business applications. Topics include: portfolio choice, asset pricing models, market efficiency and inefficiency.
Students will learn about the strengths and limitations of computer-based portfolio optimization, as the role of technology in the investment management business has become widespread. The course will examine how to use data to evaluate asset pricing models. Students will also explore how innovations and technologies based on modern finance ideas, such as index funds, smart beta, and other quantitative investment strategies, have disrupted traditional investment management. These innovations have enabled investment managers to manage large sums of money with less people, compared to the traditional "stock picker" approach.
244. Multinational Finance
This course provides comprehensive and systematic coverage of topics in multinational finance, enabling the leaders of tomorrow’s multinational enterprises to optimally make financial decisions in an international setting. We will examine the history of the world’s foreign exchange markets, the macroeconomics of foreign exchange rate, major parity conditions, and hedging of currency exposure. We will also discuss how currency exchange and risk management could be affected by the disruptive innovations, such as block chain. The scope and content of international finance have been fast evolving due to deregulation of financial markets, product innovations, and technological advancement. As capital markets of the world are becoming more integrated, an important goal of this course is to help students to understand the uncertainty of international finance and the interdependence of economies and markets over the world.
248. Corporate Valuation
This course focuses on estimating the value of firms and projects in diverse settings, paying special attention to the digitalization and globalization of the economy. Valuation is an essential aspect of most corporate and investment decisions such as financing policies, acquisitions, project development, security valuation and so on. The course will re-enforce and expand on concepts covered in the introductory finance course. It will discuss the main valuation methods and their applications in real world problems. These situations were chosen to enhance students’ understanding of the value and limitations of finance theory and implementation of the valuation methods.
The course will use a combination of lectures and cases designed to confront students with a variety of real-world problems. It will discuss the cost of capital for new technology, valuation of technology firms, and valuation of emerging market companies. The course also provides ample opportunity to enhance and develop students’ problem solving and communications skills. Such knowledge is essential for students with an interest in Corporate Finance, Investment Banking, Financial Consulting, as well as Investments.
Derivatives are new financial instruments whose value “derives” from the values of other, more basic, underlying assets such as stocks and bonds. The course will cover major derivative instruments including forward, futures, swaps and options. The focus of the course is on understanding the instruments, how to use them, how to price them, and basic risk management principles.
In today’s world where technology is disruptive, companies need to make decisions dynamically. The course will also introduce some principles of real options which will provide useful tools when companies make investment decisions taking into account of options to expand, reduce and remove.
253. Venture Capital & Private Equity & Finance of Innovation
Venture Capital (VC) and Private Equity (PE) constitute the so-called “alternative” asset class as opposed to conventional investments in stocks, bonds and commodities. Many start-ups and entrepreneurial firms require substantial capital. Bank loans and other conventional debt financings are unlikely due to high risk and uncertain prospects. Venture Capital and Private Equity organizations finance these high-risk but potentially high reward companies. In this course, through a combination of lectures and case studies, students learn how VCs and PE firms raise funds, evaluate the potential opportunities and make investment decisions.
Almost all start-ups initially have negative cash flows. Further, these digital platform based companies keep their profit margins intentionally low, so as to gain market share and/or disrupt existing players and markets. This further compounds the negative cash flows. Often cash flows remain negative year-in year-out. Traditional valuation models such as discounted cash flows (DCFs) do not properly address these issues and evaluate the true potential of these businesses. In this course, we will explore the types of models VC firms use to analyze and value these businesses. We will also explore the leveraged buyout (LBO) models and how PE firms use mezzanine financings and use of warrants to make deals and investment decisions.
290. FinTech and The Digital Economy
The purpose of this course is to provide working knowledge of the role of IT-enabled innovation in financial markets, more generally, to help students acquire an understanding of broad economic issues that are of wide applicability in many areas of FinTech. The course balances qualitative analysis and quantitative applications. You will gain experience in applying empirical tools through assignments and a mid-term report, as well as through a final project that requires you to apply the tools to the real world. Topics covered in the course include a wide range of FinTech phenomena (e.g., Bitcoin, Blockchain, Crowdfunding, Online lending, etc.), and their economic and social impacts. Overall, this course aims to equip students with the skills and knowledge required to help their professional careers in the digital age.