MSC FINANCE 2012-2013 - Edhec

MSC FINANCE

2012-2013

MSC FINANCE

2012-2013

As a CFA Partner program, the curriculum closely follows the curriculum of the CFA Level 1 and prepares students for a

wide variety of international careers in finance as well as offering them the opportunity to prepare a professional

diploma.

Its broad curriculum gives equal attention to corporate finance and capital markets and allows participants to develop

expertise in corporate financial strategy, investment banking, financial accounting, reporting and analysis, risk

management; and equity and fixed income portfolio management. CFA curriculum textbooks are used as core

programme readings to maximize participants' industry readiness.

The CFA Institute, the world's largest association of investment professionals, is globally recognised as the definitive

standard within the financial industry. This partnership gives a strong indication of the close ties between EDHEC and

the industry and further emphasises the quality of EDHEC programmes and their relevance to business.

http://msc-finance.edhec.com/news/news-finance-related/cfa-partnership-motivates-students-47493.kjsp?RH=1331712885080

MSC FINANCE

2012-2013

CORE MODULES .......................................................................................................................................................... 5

ED-MScFIN-S1-FIN-CC - CORPORATE FINANCE 1 ..................................................................................................... 6

ED-MScFIN-S1-FIN-CC - FINANCIAL ACCOUNTING AND ANALYSIS .......................................................................... 9

ED-MScFIN-S1-FIN-CC - MONEY AND CAPITAL MARKETS ......................................................................................11

ED-MScFIN-S1-FIN-CC - QUANTITATIVE METHODS IN FINANCE .............................................................................14

ED-MScFIN-S1-FIN-CC - FIXED INCOME ANALYSIS ..................................................................................................16

ED-MScFIN-S2-FIN-CC - CORPORATE FINANCE 2 ....................................................................................................18

ED-MScFIN-S2-FIN-CC - FINANCIAL ANALYSIS AND MANAGEMENT OF INTERNATIONAL GROUPS ........................20

ED-MScFIN-S2-FIN-CC - PORTFOLIO MANAGEMENT ..............................................................................................22

ED-MScFIN-S2-FIN-CC - OPTIONS, FUTURES AND OTHER DERIVATIVES .................................................................24

ED-MScFIN-S2-FIN-CC - INTERNATIONAL ECONOMICS ..........................................................................................26

SEMINARS .................................................................................................................................................................28

ED-MScFIN-S1-FIN-SEM - ADVANCED EXCEL AND VBA PROGRAMMING ...............................................................29

ED-MScFIN-S1-FIN-SEM - MATLAB ........................................................................................................................31

ED-MScFIN-S1-FIN-SEM - RESEARCH METHODOLOGIES ........................................................................................33

ED-MScFIN-S2-FIN-SEM - ETHICS AND CORPORATE GOVERNANCE .......................................................................34

VISITING STUDENTS ...................................................................................................................................................36

ED-MScFIN-S2-FIN-CC - VALUES, COOPERATION & TRUST .....................................................................................37

MSC FINANCE

2012-2013

CODE COURSE HOURS EDHEC INCOMING INCOMING

DD ECTS

ED-MScFIN-S1-FIN-SEM Avanced Excel & VBA Programming 15 x x x 1,5

ED-MScFIN-S1-FIN-SEM MATLAB 15 x x x 1,5

ED-MScFIN-S1-FIN-CC Research Methodologies 9 x x x NC

ED-MScFIN-S1-FIN-CC Corporate Finance 1 30 x x x 4

ED-MScFIN-S1-FIN-CC Financial accounting and Analysis 30 x x x 4

ED-MScFIN-S1-FIN-CC Money and Capital markets 30 x x x 4

ED-MScFIN-S1-FIN-CC Quantitative Methods in Finance 30 x x x 4

ED-MScFIN-S1-FIN-CC Fixed income analysis 30 x x x 4

ED-MScFIN-S2-FIN-CC Values, Cooperation and Trust (only for incoming) 30 x x 7

ED-MScFIN-S1-FIN-MT Master Thesis STEP 1 50 x x 5

ED-MScFIN-S1-FIN-CC TI&CD 20 x x 2

SOUS TOTAL SEMESTRE 1 259 30

ED-MScFIN-S2-FIN-SEM Research Methodologies 6 x x x 1,5

ED-MScFIN-S2-FIN-SEM Ethics and Corporate Governance 15 x x x 1,5

ED-MScFIN-S2-FIN-CC Corporate Finance 2 30 x x x 4

ED-MScFIN-S2-FIN-CC Financial Analysis & Management of International Groups 30 x x x 4

ED-MScFIN-S2-FIN-CC Portfolio management 30 x x x 4

ED-MScFIN-S2-FIN-CC Options, futures and other derivatives 30 x x x 4

ED-MScFIN-S2-FIN-CC International Economics 30 x x x 4

ED-MScFIN-S2-FIN-MT Master Thesis STEP 2 50 x x 5

ED-MScFIN-S2-FIN-CC TI&CD 20 x x 2

Internhip / Work Experience (only for IC) 480 15

SOUS TOTAL SEMESTRE 2 GE STUDENTS 241 30

SOUS TOTAL SEMESTRE 2 INTERNATIONAL CANDIDATES 721 45

MSC FINANCE

2012-2013

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 1 INTERNATIONAL PROGRAMME – 4 ECTS COURSE COORDINATOR: Alfred DAVIS COURSE OBJECTIVES The objective of the course is to expand students' knowledge of the role of financial managers in today's corporate environment by providing and developing the understanding of some of the tools necessary to make good financial decisions. The course focuses on financial decisions that affect the long-run performance and value of an enterprise. The course provides a framework for formulating these decisions that builds on the principle of value maximization and offers explanations for observed behaviour on the part of financial decision makers. The cost of raising funds (i.e., the opportunity cost of capital) to finance investments in capital assets (i.e., the capital budgeting decision), the means of raising funds (i.e., raising long-term funds), the financing of corporate assets (i.e., the capital structure decision), the payout policy of the firm (i. e., dividend policy), and expansion through acquisitions (i. e., mergers and acquisitions) are integral parts of this conceptual framework.

LEARNING OUTCOMES After having taken this course participants will be able to:

Master the first principles of finance, i.e. valuation and capital budgeting

Understand the risk-return trade-off, and the relationship between the measure of risk and expected return in accordance with the CAPM

Understand the basic types of long-term financing instruments, and key considerations surrounding the capital structure and dividend decisions

PREREQUISITES The prerequisites for the course include working knowledge of calculus, probability, statistics, linear algebra. COURSE CONTENT

Part. COURSE OUTLINE Requirements (RWJ)

1 Introduction: Why Financial Management Matters 1

2 Time Value of Money 4, 4A

3 Valuation of Bonds and Stocks 8, 9

4 Risk and Return, and CAPM 10, 11

5 Opportunity Cost of Capital 13

6 Capital Budgeting 5, 6, 8.5, 18

7 Raising Long-Term Funds 15, 20

8 Capital Structure and the Cost of Capital 16, 17

9 Dividends and Firm Valuation 19

10 Mergers and Acquisitions 29

Lecture 1: Part 1 + Part 2

Part 1: Introduction: Why Financial Management Matters

Part 2: Time Value of Money Lecture 2: Part 3 + Part 4

Part 3: Valuation of Bonds and Stock

MSC FINANCE

2012-2013

Part 4: Risk, Return and CAPM Lecture 3: Part 5 + Part 6 to p. 6 - 44

Part 5: Opportunity Cost of Capital

Part 6: Capital Budgeting Lecture 4: Complete Part 6 pages 6 - 45 to p. 6 - 100

Assignment 1 due at the beginning of class

Part 6 Concluded: Capital Budgeting Lecture 5: Part 7

Part 7: Raising Long-Term Funds

Lecture 6: Part 8 to pages 8 – 39 + Case 1

Part 8: Capital Structure and the Cost of Capital

Case 1 : Lecture 7: Complete Part 8 pages p. 8 – 40 to 8 – 73

Assignment 2 due at the beginning of class

Part 8 Concluded: Capital Structure and the Cost of Capital Lecture 8: Part 9

Part 9: Dividends and Firm Valuation Lecture 9: Part 10 to page 10 – 38

Part 10: Mergers and Acquisitions Lecture 10: Complete Part 10 pages 10 – 39 to 10 – 55 + Case 2

Part 10 Concluded: Mergers and Acquisitions

Case 2:

Assignment 3

TEACHING & LEARNING METHODs Lectures and readings, exercises 1. Notes for Corporate Finance: These notes consist of all of the slides that will be used in class. It is recommended that you come to class with a hard copy of the slides for the material to be covered that day. It is good practice to have the next day's notes with you as well. You will not have time to copy down the slide material and to take notes on additional information that will be discussed in class. So make sure to have a copy of the relevant slides with you at every class. 2. Assignments: Assignments consist of problems. They MUST be done in groups of five to seven (5 to 7) individuals, with only one paper handed in for each group. You must submit a list of group members two (2) days before the due date of each assignment. The members of the group may change from one assignment to the other. 3. Cases: Two (2) cases will be discussed in class. Like the assignments they MUST be prepared in groups of five to

seven (5 to 7) individuals. You must submit a list of group members two (2) days before the due date of each case.

The members of the group may change from one case to the other. All member of the group MUST be present in class

during the discussion of the case. You will not be required to submit a written solution to the case. However, your

group is expected to come to class prepared to discuss the cases in detail. All groups should prepare any power point

slides and/or excel spread sheets that can be used to back up your analysis of the case if/when called upon.

4. Exam: There is a 3 hour final exam 5. Classroom Etiquette: The use of mobile (cell) phones or tablets of any kind during class is strictly prohibited. Anyone using such devices during class will have them taken away for the remainder of the class. To avoid this situation,

MSC FINANCE

2012-2013

TURN OFF YOUR MOBILE PHONE OR TABLET BEFORE CLASS STARTS. The use of a lap-top computer is NOT permitted during class. Like the cell phones and tablets, anyone using a lap-top computer during class will have it taken away for the remainder of the class. BE SURE THAT YOUR LAP-TOP COMPUTER IS OFF AND OUT OF SIGHT. On the third (3rd) use of a lap-top or on the third (3rd) use of a cell phone/tablet during class the student will be asked to leave class.

ASSESSMENT METHODS The final course grade will be determined from the following weighting system:

30% Three (3) Assignments

10% Two (2) Cases

60% Final Exam (3 hours) RECOMMENDED READING S. A. Ross, R. W. Westerfield and J. F. Jaffe. Corporate Finance 9th Ed. McGraw-Hill, 2010. (RWJ) The Notes (Power Point Sides) for the Corporate Finance Class

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 1 INTERNATIONAL PROGRAMME – 4 ECTS COURSE COORDINATOR: Paul KLUMPES

COURSE OBJECTIVES A foundation course designed to ensure an understanding of how financial statements are established in order to enable participants to undertake courses in financial analysis, M&A and financial management. After examining specific accounting issues such as inventories, receivables, liabilities, long-term assets, and cash flows, the course discusses conceptual and technical problems in financial statement analysis and develops the theoretical benefits and practical application of using techniques in fundamental analysis to critically appraise the valuation and forecasting of economic value of corporations.


Understand companies’ financial statements, accounting principles and accounting mechanics.

Prepare balance sheets, income statements and cash flow statements..

Develop a better understanding of the basic mechanics of financial statement analysis,

Compare traditional equity valuation models with more comprehensive valuation models, and

Gain a critical appreciation of these models in various business contexts, including application to risk management exposures.

COURSE CONTENT 10 lectures of 3 hours each

Lesson N° Course content

1 Accounting as an Information System: Operating, Investing and Financing Activities Financial Statements, Continuity, Periodicity, Matching

2 Balance sheet

3 Income statement and statement of changes in shareholders equity

4 Cash Flow Statement

5 Drivers of stock prices and security valuation

6 Mechanics of fundamental analysis

MSC FINANCE

2012-2013

7 Analysis of financial statements

8 Forecasting and valuation

9 Accounting and Economic valuation

10 Evaluating accounting quality

TEACHING & LEARNING METHODS During lectures, both theory and applied examples will be used. Exercises and case examples will also be used in class. You are required to actively participate in the lectures and seminars/case discussions.

ASSESSMENT METHODS 60% Final exam (Duration 3 hours) 40% Group research project (Coursework to be handed in)

RECOMMENDED READING READINGS / Required: Penman, Financial Statement analysis and security valuation, McGraw hill 3

rd edition

CFA Institute, Financial Statement Analysis, Level I Additional Readings: S.A. Ross, R.W. Westerfield, J.F. Jaffe, Financial Management, McGraw-Hill/Irwin

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 1 INTERNATIONAL PROGRAMME – 4 ECTS COURSE COORDINATOR: Marc KITTEN - [email protected]

COURSE OBJECTIVES & LEARNING OUTCOMES The aim of this course is to:

Give students a global understanding of the financial markets industry, the players and the roles.

Develop a mastery in the techniques and skills necessary for operating at practitioner level in several areas in the financial markets, including origination, research, buy- or sell-side, and thus enhance investment, financing or strategic performance.

Introduce the advanced courses and electives they will attend during the year.

Give them the necessary bases to develop risk management skills as part of their general management education.

PREREQUISITES Finance 101: financial mathematics, time value of money, structure of capital

COURSE CONTENT

Lesson N°

Course content Requirements

1 1-Financial markets products

a) Rate instruments

Treasury products (Franck Ciosi) Time value of money

2 Treasury products (Franck Ciosi)

3

b) Rate instruments

Determinants of interest rates and yield curve

Bonds and repo

Technical product characteristics and elements of pricing

4

c) Equity instruments

Technical product characteristics

Elements of pricing

IPOs d) Hybrid securities: a new asset class?

Structure of the capital

5

e) Risk management with derivatives

Introduction to financial risk management - Risk, financial risk, derivatives and insurance - Risk management and shareholders’ value - Risk management disasters

Forwards and futures Case study 1: LTCM

Basic financial mathematics

6 Swaps

Options Basic financial mathematics

7 f) Buying or selling a product in financial markets

1b-Appendix - Careers and recruiting in the trading room

Personal research and networking in financial markets industry

mailto:[email protected]

MSC FINANCE

2012-2013

Main functions in the bank trading room and behind the Chinese Wall

The “Sell Side”. Origination, trading, sales and research

The “Buy Side”. Fund management, research, trading and sales

8

Case study 2: Walt Disney’s Yen Financing 2-Behavioural finance

Theory vs. practice

Limits of market efficiency

Market efficiency theory

9

3-History and organisation of financial markets a) History b) Financial Centres c) Central banks

Genuine interest for the industry and its economic, regulatory and strategic drivers, beyond the appetite for technical products (ability and desire to get the big picture will make the difference between a technician and a future manager)

10

The Financial Services industry

Securities firms and investment banks - Universal banking and the US model - Investment banking and capital markets (issuance) - Brokers

Other players in financial markets - Insurance companies - Asset managers - Hedge Funds - Exchanges - Information providers

TEACHING & LEARNING METHODS Lectures, readings, cases studies, exercises, discussion in class

ASSESSMENT METHODS 40% Mid course group case study 60% Final exam (Quiz)

RECOMMENDED READING (A Readings Package will be distributed) Text book: The course books are the relevant CFA Level I volumes (the chapters below are from the 2009 edition but they correspond to our first part on products: bonds, stocks and derivatives).

In volumes 5 and 6, we cover Readings 52, 53, 54, a small part of 55, then 60 to 72. In Reading 73, we discuss hedge funds, and very rapidly a few more topics like commodities and private equity.

We don't cover volume 4 (portfolio theory). While useful for our discussions, it is covered in another class. Some parts of the course are not covered in the CFA volumes. If interested in a career in financial markets, you should definitely read the following books:

Essentials of Investments, Bodie Zvi, Alex Kane & Alan J. Marcus, McGraw-Hill

A Random Walk Down Wall Street, Burton G. Malkiel, Norton, ISBN 0-393-31529-0

Options, Futures and Other Derivatives, John C. Hull, ISBN: 0-13-149908-4 Other useful readings:

Vault Career Guide to Sales and Trading (www.vault.com)

MSC FINANCE

2012-2013

Investment Illusions, Martin S. Fridson, Wiley, ISBN 0-471-15551-9

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance, Ron Chernow, Grove Press, ISBN 0-802-13829-2

The Bonfire of Vanities, Tom Wolfe, Bantam, ISBN 0-553-27597-6.

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 1 INTERNATIONAL PROGRAMME – 4 ECTS COURSE COORDINATOR:

COURSE OBJECTIVES This course aims at providing students with the essential quantitative concepts that professionals in various fields of today’s financial industry need to master. Distributed over 30 hours, the course will introduce the statistical and probability concepts that are used to analyze market returns. Key tools like regression analysis and time series analysis will form the core of the course. Separate sessions will teach students how to apply these concepts using standard software

LEARNING OUTCOMES This course will:

Provide students with a wide-ranging understanding of the major tools used by investment analysts, financial managers and other professionals in today’s financial industry.

Demonstrate how quantitative methods can be applied to the analysis of financial markets and securities.

Illustrate how the methods can be implemented with standard software.

PREREQUISITES The course assumes as prerequisites the first two chapters of the required textbook, Quantitative Investment Analysis. These chapters deal respectively with the time value of money and discounted cash flow applications.

Basic knowledge of calculus

Basic knowledge of financial markets and products

Basic knowledge of statistics and probability theory useful The Introductory lectures by Prof Focardi available on the EDHEC site provide the background knowledge

COURSE CONTENT Correlation and Regression

Correlation Analysis

Linear Regression:models, estimation, diagnostic

Multiple Linear Regression: model, estimation, diagnostic

Dummy Variables ARCH and GARCH models

Heteroscedasticity and Conditional Heteroscedasticity

ARCH: models, estimation, diagnostic

GARCH: models, estimation, diagnostic

Extensions and generalizations Time-Series Analysis: univariate stationary processes

Autoregressive Processes (AR): model, estimation, diagnostic

Moving Average Processes (MA) ): model, estimation, diagnostic

ARMA Models): model, estimation, diagnostic Time-Series Analysis: multivariate stationary processes

Vector Autoregressive Processes (VAR): model, estimation, diagnostic

Vector Moving Average Processes (VMA) ): model, estimation, diagnostic

Vector Moving Average Models(VARMA): model, estimation, diagnostic

MSC FINANCE

2012-2013

Factor models

Classical factor models

Factor analysis

Factor models based on characteristics and sectors Principal components analysis

Eigenvalues and eigenvectors

Principal components

Factor models and principal components analysis TEACHING & LEARNING METHODS Lectures, readings, cases studies, exercises

ASSESSMENT METHODS 20% First Homework 20% Second Homework 60% Final Exam

RECOMMENDED READING Quantitative Investment Analysis, CFA Institute Investment Series, 2

nd edition.

Other Useful References

The Professional Risk Managers’ Handbook, A Comprehensive Guide to Current Theory and Best Practices, Edited by Carol Alexander and Elizabeth Sheedy. Volume II: Mathematical Foundations of Risk Measurement.

Brooks, C. Introductory Econometrics for Finance, Cambridge University Press.

Campbell, J. Y., Lo, A. W., and MacKinlay, C. A., The Econometrics of Financial Markets, Princeton University Press.

DeGroot, M. H., Probability and Statistics, Addison Wesley.

Fabozzi, F., S. Focardi, and P. Kolm, Financial Modeling of the Equity Market: From CAPM to Cointegration, Wiley

Johnston, J. and J. Dinardo, Econometric Methods, 4th

Edition, Mc Graw Hill.

L’Habitant, Serge François, Hedge Funds – Quantitative Insights, John Wiley & Sons.

Taylor, S., Modelling Financial Time Series, John Wiley & Sons.

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 1 INTERNATIONAL PROGRAMME – 4 ECTS COURSE COORDINATOR: Joëlle MIFFRE – [email protected]

COURSE OBJECTIVES This course gives students the skills necessary to understand the pricing and managing of fixed income securities. It is about interest rates and risk management in bond markets. The course develops insights into different bond portfolio strategies and provides extensive coverage on the techniques for valuing bonds. While most courses on the subject cover in some details the issues related to bond pricing and hedging, one typically does not find the same level of depth in the analysis of active and passive bond portfolio strategies. This is perhaps unfortunate because we have learnt a lot about active and passive bond portfolio strategies in the past 30 years or so. While no financial economist or practitioner in the industry would claim they have found a reliable model for the valuation of stocks, we have reached a fairly high level of understanding on how, why and when to invest in bonds. We attempt to provide in this course a practical presentation of state-of-the-art techniques allowing investors to deal with interest rate risk in the best possible conditions. More specifically, we attempt to achieve the following objectives:

Describe important financial instruments which have market values that are sensitive to interest rate movements,

Develop tools to value fixed income securities: Construction of discount functions with advanced techniques that take into consideration the level, the slope and the curvature of the yield curve,

Develop tools to analyze interest rate sensitivity and manage interest rate risk: Duration, convexity, hedging the risk of fixed-income securities using term structure models,

Active and passive bond portfolio management: Develop techniques that are meant to either beat or replicate the performance of fixed-income indices


Price fixed income securities and hedge their risk

Distinguish the main passive and active approaches to fixed income portfolio management

Apply to risk and asset management positions in Fixed Income

PREREQUISITES None. However this course is oriented towards a rigorous, quantitative, approach to fixed-income portfolio management and involves a fair amount of work. It might prove challenging to those who are more interested in simple description of the institutional aspects of bond markets. It is strongly recommended that students read the first 8 chapters of the recommended textbook before coming to class.

COURSE CONTENT

Lesson N°

Course content

1 Bond Markets and Instruments

2 Bond Prices and Yields

3 Empirical Properties and Classical Theories of the Term Structure of Interest Rates

4 Deriving the Zero-Coupon Yield Curve

5 Hedging Interest Rate Risk via Duration

6 Beyond Duration


MSC FINANCE

2012-2013

7 Passive Bond Portfolio Strategies

8 Active Bond Portfolio Strategies: Part I

9 Active Bond Portfolio Strategies: Part II

10 Revisions

ASSESSMENT METHODS 60% Final exam (Duration 3 hour) 40% Coursework

RECOMMENDED READING Fixed-Income Securities: Valuation, Risk Management and Portfolio Strategies - Authors: Lionel MARTELLINI, Philippe PRIAULET, Stéphane PRIAULET - Publisher: John Wiley.

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 2 INTERNATIONAL PROGRAMME – 4 ECTS COURSE COORDINATOR: Florencio LOPEZ DE SILANES

COURSE OBJECTIVES The focus of this course is on international corporate finance. The current state of global markets’ volatility has a serious impact on “perceived” and inherent corporate valuations. Furthermore, the current wave of financial scandals in Europe, the U.S., and elsewhere has alerted investors about the lack of efficient mechanisms of corporate control across countries. To face these challenges, the course focuses on setting up the framework for understanding how financial contracts are written around the world and how these contracts affect basic corporate policies. Differences in institutional characteristics have recently been shown to be key determinants of how corporations are owned and valued, as well as how they raise capital and give it back to investors. In this course, we will analyze:

1. What are best corporate governance practices? 2. How are corporations owned? 3. How can we understand Mergers and Acquisitions? 4. How do firms determine their pay-out policies? 5. What is the role of financial contracting in mitigating opportunistic behaviour? 6. and how do firms finance themselves across countries?

LEARNING OUTCOMES This course is intended for students who plan to be involved at various stages of the investment and financing processes of international projects. Financial contracting has implications for entrepreneurs in the international arena, transaction advisors (investment bankers, commercial bankers, or consultants), corporate sponsors (members of private equity and venture capital firms, corporate finance and strategic planning departments), research analysts, international investors and money managers. The course is also appropriate for students seeking to deepen their understanding of corporate and entrepreneurial finance inside and outside Europe and the United States. The course topics are detailed below.

PREREQUISITES The prerequisites for the course include working knowledge of calculus, probability, statistics, linear algebra and basic computer literacy and database proficiency (e.g., excel).

COURSE CONTENT

Meeting Assignment

1 Agency & Corporate Governance (part 1)

2 Agency & Corporate Governance (part 2) Ownership Structures

3 Case: Koito Ltd.

4 Mergers and Acquisitions

5 Case: Samsung Electronics

6 Raising Capital Lecture Dividend Policy (part 1)

7 Case: Perrier

8 Dividend Policy (part 2)

9 Case: Huaneng Power

10 Case: Alphatec Wrap up Lecture

MSC FINANCE

2012-2013

TEACHING & LEARNING METHODS The course will be graded on participation, exam, presentation and casework. Illustrative cases will be developed in groups and discussed in class. Teams presenting their case solutions in class will get higher grades. Groups: There are several cases and/or assignments throughout the course that can be prepared and worked out in groups. You have a week to form your group and inform us of the names of the people in your group. By the end of the first week of classes, you need to form your groups and send and email to me, Alexandra Matricon, and Catherine Mathieu with the names of all the participants in your group. The maximum number of people in a group is four. You cannot switch groups in the middle of the course: groups are permanent for the duration of the course. Cases: There are several cases that will be part of your grade. You are expected to have prepared your case in groups and to have turned in your answers (via the procedure outlined below) 10 minutes BEFORE the beginning of the first lecture where the case will be discussed (see the specifics under each case). I recommend that you also bring an additional printout of your answers into class to work through our discussion, ask questions to the groups that are presenting, and take further notes. The answers to the case have to be in one single PDF file (which can incorporate what ever documents you want from word, excel, pictures, photocopies, power-points, etc…). You can use whatever you want to use to answer the questions and back up your answers. But the important thing is that you put all of those documents together in one single PDF file per group. So, remember: only one file per group per case. All groups need to turn in answers to all cases The only exception will be for the groups that are presenting orally a specific case. The groups that are orally presenting a specific case should turn in their power-point answers. They will count as the equivalent of the pdf that the rest of the groups are turning in. Case discussions and oral presentations: Each group will be required to present orally at least one case (depending on the number of groups in each class). I am allowing groups to choose the case they want to present on a first-come-first-served basis. So, in the same email where you sent me the name of the people that form your group, you should also rank the cases according to your preference for presenting orally to the class. As I said above, I will assign case presentations on a first-come-first-served basis as much as possible, but you may not be able to get your first choice. If by the second lecture you have not given me the information, I will assign you to groups randomly and/or chose the case that you will present. For the case discussions in class, the groups that are presenting need to prepare a power point presentation (which can include excel calculations, pictures, pdfs, etc…). This power point should include all your answers to the case and should be turned in before class in the exact same schedule as the rest of the class is turning in the written answers to the case (see below for the specific dates and times). There will be several groups preparing each case for presentation in class at each time, depending on the number of students, etc... The rest of the students who are not presenting the case, are expected to be ready to participate actively in questioning the results presented by the other groups and making additional contributions. Participation is part of the final grade and a good participation through the course could earn you extra points.

ASSESSMENT METHODS 30% Case reports by groups (at most 5 people). 10% Group case presentation in class 10% Individual in-class participation during lectures. 50% Individual over-night take-home final exam .

RECOMMENDED READING The reference textbook for the course is Principles of Corporate Finance by Brealey and Myers, McGraw-Hill 9th Edition. You will also have an electronic or a hard copy of all the additional readings, assignments, and lecture notes. .

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 2 INTERNATIONAL PROGRAMME– 4 ECTS COURSE COORDINATOR: Georges IATRIDIS

COURSE OBJECTIVES The main aim of this course is twofold: i) to introduce students to the theory behind and application of consolidated financial statements and ii) to introduce and analyse important concepts of financial analysis and management of international groups.


Prepare the main consolidated financial statements (i.e. balance sheet and income statement) following an IFRS approach,

Understand the issue surrounding partnerships and segment reporting,

Understand the ideas, frameworks and theories surrounding the relationship between the returns on a security and its risk and explain the key characteristics of single- and multi-factor capital asset pricing models,

Demonstrate an understanding of the main stock valuation models,

Describe the underlying assumptions, rationale and conclusions of Modigliani and Miller’s models, in worlds with and without tax,

Explain the calculation of the cost of equity, debt and preference share capital, and calculate a weighted average cost of capital for a firm,

Apply the main foreign currency translations methods as prescribed by IFRS, and

Explain the nature of derivatives and their use for risk management.

PREREQUISITES Sound knowledge of the fundamentals of Financial Accounting.

COURSE CONTENT 10 lectures of 3 hours each

Lecture N°

Course content

1 Consolidation Theory

2 Consolidation Methods

3 Consolidation Exercises

4 Partnerships

5 Segment Reporting

6 Capital Asset Pricing Model, Market Model, Arbitrage Pricing Theory, Fama and French Three Factor Model

7 Stock Valuation

MSC FINANCE

2012-2013

8 Capital Structure and Weighted Average Cost of Capital

9 Foreign Currency Translation

10 R & D Costs

TEACHING & LEARNING METHODS During lectures, both theory and applied examples will be used. Exercises and case examples will also be used in class. You are required to actively participate in the lectures and seminars/case discussions.

ASSESSMENT METHODS 60% Final exam (Duration 3 hours) 40% Group research project (Coursework to be handed in)

RECOMMENDED READING Required:

Financial Accounting and Reporting, Elliott and Elliott, FT Prentice Hall.

Corporate Financial Management, Arnold, FT Prentice Hall. Additional:

Principles and Practice of Group Accounts: A European Perspective, Pierce and Brennan, International Thomson Business Press.

The Cost of Capital, Corporation Finance and the Theory of Investment, Modigliani and Miller, The American Economic Review, 48.

Corporate Finance, Ross, Westerfield and Jaffe, McGraw Hill/Irwin.

International Financial Management, Cheol and Resnick, McGraw Hill/Irwin.

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 2 INTERNATIONAL PROGRAMME– 4 ECTS COURSE COORDINATOR: Philippe MALAISE

COURSE OBJECTIVES Twenty years of academic and professional research have shown that the average active fund manager underperforms the market index. A paradigm change is currently taking place, accelerated by several years of down markets that have emphasized the weakness of current asset management practices. Drawing on the expertise developed at the Edhec Risk and Asset Management Research Centre, this course equips participants with both the technical and conceptual tools that will allow them to take an active role in this fast-evolving environment. In particular, it provides a detailed introduction to the modern approach to portfolio management that advocates a clear separation between the management of normal returns (a.k.a. betas) emanating from exposure to rewarded sources of risk and the management of abnormal returns (a.k.a. alphas) emanating from active managers’ unique expertise to generate excess return above and beyond the risks taken. More specifically, the course first focuses on the technical challenges involved in portfolio optimization with specific emphasis on the need for enhanced estimates of risk and expected returns. After this presentation of state-of-the-art techniques for optimal beta management, we present several key extensions of portfolio selection methods, which are particularly suitable in the context of tail risk management. The course then goes on to cover an overview of recent academic research and practical industry examples of these latest techniques used in the design of investors’ portfolios.

LEARNING OUTCOMES After having taken this course, participants will be able to:

Understand when and why modern portfolio theory fails in the real world;

Make covariance matrix estimation manageable and improving parameter estimates;

Implement alternative portfolio models integrating non-normality risks, parameter uncertainty, and realistic risk preferences;

Use Bayesian analysis in portfolio construction;

Construct portfolios including alternatives asset classes and investment styles; defining their statistical benchmark and measuring their relative performance;

Design dynamic risk-controlled strategies that are aimed at improving investment efficiency.

PREREQUISITES Knowledge and practical experience with Excel and Matlab

COURSE CONTENT

Lesson N°

Course content

1 Introduction: Paradigm Shifts in the Asset Management Industry

2 Advanced Techniques for Covariance Matrix Estimation

3 Advanced Techniques for Expected Return Estimation

4 Accounting for more General Risk Measures: - From Mean-Variance to Higher Moments, - Portfolio Optimization with Higher Moments

MSC FINANCE

2012-2013

5 Typology of Passive Management Strategies

6 Typology of Active Management Strategies

7 Portfolio Alpha Measurement Search for Alpha through Multi-management Performance Attribution

8 Basics of Core-Satellite Portfolio Management

9 Risk-Controlled Strategies: CPPI and OBPI

10 Dynamic Core-Satellite Strategies and Generalized Horizon-Dependent Risk-Controlled Strategies Conclusion: From Investment Products to Investment Solutions

TEACHING & LEARNING METHODS Short application cases and excel-based illustrations are systematically used throughout the course to help students synthesize concepts and master techniques.

ASSESSMENT METHODS Student evaluation comes from real case studies that introduce practical examples of a sophisticated portfolio management process, and involve a direct numerical implementation of the methods presented in this course.

RECOMMENDED READING Textbooks:

Scherer, B., Portfolio construction and risk budgeting (3rd edition), 2007.

Meucci, A., Risk and asset allocation, Springer Verlag, 2005. Required Readings:

Edhec Funds of Hedge Funds Reporting Survey (2004)

Revisiting Core-Satellite Investing – A Dynamic Model of Relative Risk Management, Amenc, Malaise, and Martellini, The Journal of Portfolio Management (2004)

Edhec European Asset Management Practices Survey (2005)

From Delivering to Packaging of Alpha, Amenc, Malaise, and Martellini, The Journal of Portfolio Management (2006)

Edhec European Alternative Diversification Practices Survey (2006)

Assessing the Quality of Stock Market Indices, Amenc, Goltz, and Le Sourd (2006)

Asset-Liability Management Decisions in Private Banking, Amenc, Martellini, and Ziemann, Edhec Study sponsored by Pictet & Co (2007)

Edhec European ETF Survey (2008)

Edhec European Investments Practice Survey (2008)

.

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 2 INTERNATIONAL PROGRAMME– 4 ECTS COURSE COORDINATOR: Abraham LIOUI

COURSE OBJECTIVES This is an intermediate course on Derivatives. It provides the students with the basic concepts of Derivatives trading and pricing. At the end of the course, the student will know i) how a derivatives exchange works; ii) what are the main differences between an exchange and the OTC; iii) what are derivatives useful for; iv) what is a forward contract and how we price it; v) what is a futures contract and how we price it; vi) what is an option and what can we do with options; vii) what are exotic options. The course will not be a catalogue of existing Derivatives markets but rather a presentation of the common principles at the basis of Derivatives markets design as well as Derivatives pricing.


Trade derivatives and manage dynamically portfolios of derivatives

Use derivatives for hedging purposes

PREREQUISITES Basic calculus, algebra and statistics. Knowledge of foundations of finance (discounting,…) will be extremely useful.

COURSE CONTENT

Lesson N°


1,2

Forwards and Futures

Differences between forwards and futures

Speculation, Hedging, Arbitrage

Usual underlying (index, interest rate and currencies)

Chapter 2, 3and 5 (Hull)

3

Introduction to Options Markets

Options classes and series

Market Makers

Examples of contract specification on leading markets

Chapter 8 , 9 (Hull)

4

Static Strategies using Options

The Call Put Parity

Combinations, Spreads,….

Chapter 10 (Hull)

5 Options Pricing: the binomial model

One period model

Multi periods model

Completeness and Risk Neutral Valuation

Chapter 11 (Hull)

6

7,8

Options Pricing: the Black and Scholes model

The Black and Scholes formula and its extensions

Implied volatility and Smiles

Chapter 13 (Hull)

9

Dynamic Strategies with Options

The Greeks

Computation of the Greeks for a portfolio

Limits of the dynamic strategies

Chapter 17, 18 (Hull)

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2012-2013

10

Long term interest rates futures and SWAPS

Cheapest to deliver and conversion factor

Interest rate and currency SWAPS

Pricing and hedging SWAPS

Chapter 30, 31 (Hull)

TEACHING & LEARNING METHODS Technical developments will alternate with examples and applications.

METHOD OF ASSESSMENT Students will be evaluated on the basis of a written final exam (accounting for 70% of the overall grade) and two group homework (accounting for 15% each) which will be in the form of a problem set given at the end of each part of the course.

RECOMMENDED READING Main textbooks: Hull, J., 2011, Options, Futures and Other Derivatives, Prentice Hall. McDonald, R., 2006, Derivatives Markets, Pearson.

As a baseline, I will use the Slides accompanying these books with some changes (small or big depending on the Chapter). I will give exercises based mainly on the Hull book. Solutions manual to end of Chapter problems is in the library.

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 SEMESTER 2 INTERNATIONAL PROGRAMME– 4 ECTS COURSE COORDINATOR: Alain VENDITTI

COURSE OBJECTIVES The objective of this course is to understand the fundamental mechanisms of why economies move the way they do within an international context. It is intended to allow managers to interpret what they hear and read about the global economic context of business with particular emphasis on the implications for the financial markets. The final goal is to train participants to use the “scientific equipment” derived in studying “theory” to analyze actual business problems. “Macroeconomics studies the overall performance of an economy as measured by such variables as the level and growth of the economy (incomes or output), the level and variations in employment, the general level and changes in prices, the level and changes in interest rates, the level and change in exchange rates, and the structure and impact of a nation’s balances in dealing with the rest of the world. These changes take place subject to a certain number of constraints, such as demography, institutional structure, governance systems etc. We will be taking a close look at theoretical models, i.e. causal chains, economists propose to explain the way these quantities evolve, how they relate to each other and how economic policy may influence them. Amongst others, we will cover the following topics:

Getting a feel for the magnitudes of economic variables and their change over time (worldwide growth rates, inflation rates, unemployment rates, interest rates, trade flows, trade volumes, exchange rates, GNP absolute amounts, per capita amounts, demographics, real commodity prices, stocks of ‘money’ etc)

Understanding and interpreting National Income Accounting

Understanding the theory of the ‘firm’ and market dynamics of supply and demand and the concept of ‘equilibrium’

Understanding consumption, investment and real markets

Understanding the monetary system and implications

The aggregate demand and aggregate supply interactions and implications

Clarifying the role of expectations and expectation formation

Understanding inflation, growth, unemployment, external imbalances and transmission mechanisms

Effects of government policies

Understanding international trade, capital flows, and exchange rates

How to cover exchange rate risk

Understanding international financial crises


Have a knowledge about the magnitudes of standard economic variables and their change over time

Understand the basic macroeconomic mechanisms in closed and open economies

Understand the main effects of monetary and fiscal policies on various macroeconomic variables in closed and open economies

Understand international financial crises

PREREQUISITES None.

COURSE CONTENT

MSC FINANCE

2012-2013

Lesson

N° Course content

1 Introduction: Overview of the World Economic Situation and Trends

2 Measuring Macroeconomic Performances: the National Income and its Use, Unemployment, Inflation

3 Behind the Aggregate Supply Curve – Understanding Productivity, Costs, and Output

4 Behind the Aggregate Demand Curve – Understanding Consumption and Investment Behavior (the “real” markets)

5 Behind the Aggregate Demand Curve - Understanding the Money and Financial Markets and Interest rates

6 Understanding Growth, Inflation, Unemployment and the Various Policy Tools and Their Effects

7 Understanding Floating Exchange Rates and How to Cover FX Risks

8 Understanding Fixed Exchange Rates Systems and Economic Policy in an Open Economy

9 Understanding International Capital Movements and Financial Crises

TEACHING & LEARNING METHODS There will be a free access to the slides on the blackboard website. An active participation in the discussions is expected.

ASSESSMENT METHODS There will be tests in class and a final exam and your overall course grade will be determined as follows: 60% Final exam 25% Tests at home (questions and exercises prepared on a personal basis) 15% Classroom participation

RECOMMENDED READING “Economics and Financial Statement Analysis & CFA Program Curriculum, Volume II” is the basis of what we will cover. There is no required textbook. However, the following will be helpful to understand most of what we will be discussing.

MACROECONOMICS By O.J. Blanchard

INTERNATIONAL ECONOMICS (Parts III & IV) By P. Krugman & M. Obstfeld

MACROECONOMICS: Gregory Mankiw – Seventh edition

INTERNATIONAL MACROECONOMICS: Peter Montiel

FOUNDATIONS OF INTERNATIONAL MACROECONOMICS: Maurice Obstfeld & Kenneth Rogoff

MSC FINANCE

2012-2013

MSC FINANCE

2012-2013

NUMBER OF HOURS: 15 (5 sessions of 3 hours each) SEMESTER 1 INTERNATIONAL PROGRAMME– 1.5 ECTS COURSE COORDINATOR: Carlos Heitor CAMPANI

COURSE OBJECTIVES The course is designed to give the students knowledge of how to use Excel and Visual Basic for Applications (VBA) on financial modeling problems. Real-life problem examples will be extensively used in the learning process. This course is designed to be essentially practical! In the end of the course, students must have gained a clear idea of how important is Excel and VBA in finance, as well as have been exposed to several finance problems that they will be dealing with in other courses during the program.


Automate repetitious and tedious Excel tasks;

Extend Excel’s formula set by adding their own user-defined functions;

Dramatically improve the ease and power of their spreadsheets, by using advanced Excel tools and VBA subroutines, functions and interface elements; and

Develop skills to solve complex financial problems in Excel, making use of VBA by coding function and subroutine procedures with structured programming.

PREREQUISITES Excel worksheets handling knowledge and basic concepts on mathematical finance. No computer programming knowledge is required.

COURSE CONTENT It is very important to understand that the course content below is a best-case scenario. Obviously, what will be really covered will depend on the students level and how they respond to the course.

Lesson N°


1

Overview of the Course Using Excel in Finance – Part 1

Using EXCEL as a calculator (the basics and some built-in functions)

Logical functions

Lookup & Reference functions

Financial functions

Data Validation, Goal Seek and Scenario Manager tools

Table and Data Table

Application: Project analysis, NPV, IRR, sensitivity analysis, annuities etc

2

Using Excel in Finance – Part 2

Circular Reference and Solver tools

Data analysis: Sorting, Filtering, Plotting graphs and Pivot Table tools

Statistical functions and tools (Analysis Toolpack)

Simple and multiple regressions

Random number generation

Application: Data analysis, Markowitz portfolio selection model and plain-vanilla option pricing using Monte-Carlo simulation

In class: Assignment 1. After Class: Read Chapter 2 (Book 1).

MSC FINANCE

2012-2013

3

An Introduction to VBA

Getting started: Basic concepts

The IDE (Integrated Development Environment)

The built-in macro recorder

Subroutines (subs) and (user-defined) function procedures

Doing references, selecting and activating cells and ranges

Variable declaration and types of variables

Functions GetObject and CreateObject

Arrays and collections

Custom built variable type

Constants

Arguments in procedures and methods: General rules, ByRef and ByVal passage

Static variables

Good programming practices

Exit and End commands

Application: Decoding a VBA subroutine

After class: Read text “VBA_Tutorial”.

4

Programming in VBA

Property procedures

Recursive procedures

The Auto_Open macro

Logical operators in VBA

Subroutines with loops: While…Wend, Do While…Loop (and variation), Do Until…Loop (and variation), For...Next ( with step), For Each…Next

Conditional statements: If (all variations, including Iif), Select Case (all variations) and Switch

GoTo command

Dialog boxes: MsgBox, InputBox and others such Open, SaveAs etc

Excel functions vs. VBA functions

String manipulation

Debugging tools

Error management

Application: Writing VBA procedures

After class: Read Chapter 3 (Book 1). Assignment 2.

5

Applying VBA in Finance

Including a Macro Trigger Into Excel’s Interface

Using Excel tools in VBA codes (especially the Solver)

Application in Finance: Mean-variance optimization

Application in Finance: Pricing exotic & path-dependent options using Monte-Carlo simulation

After class: Read Chapter 4 (Book 1). Assignment 3.

TEACHING & LEARNING METHODS Lectures (slides), readings, exercises, case studies

ASSESSMENT METHODS Three assignments (25%, 25% and 50%)

RECOMMENDED READINGS 1) Advanced Modelling in Finance Using Excel and VBA by Mary Jackson and Mike Staunton. 2) Financial Analysis and Modeling Using Excel and VBA by Chandan Sengupta.

MSC FINANCE

2012-2013

NUMBER OF HOURS: 15 SEMESTER 1 INTERNATIONAL PROGRAMME– 1.5 ECTS COURSE COORDINATOR: Hamad HAZIM

COURSE OBJECTIVES Matlab was intended originally for numerical computation and simulation of mathematical models. It became a sophisticated tool for engineering, statistics and quantitative finance since one could add additional toolboxes such as the “ financial toolbox”, the “econometric toolbox”, the “statistics toolbox” and the “fixed incomes toolbox”. The statistics toolbox includes all classical measures (mean, variance, covariance, correlation, higher order moments, etc.) and plotting techniques of Data (Charts, Table, Histograms, Curves, surfaces etc.). It is a powerful tool for statisticians. In contrast to Excel, Matlab can deal with big sets Data (useful for high frequency trading) with high speed. The financial toolbox contains functions and black-box to compute bond prices and other fixed income derivatives. One classical use of the econometric toolbox is the performing of historical and Monte Carlo simulations usually used for risk management (VaR, MDD, etc..). The software is easily interfaced with Excel and with other programming language such as C and Fortran. This course introduces Matlab and the basic concept of its programming language and syntax. It also presents the Matlab built-in functions with their uses in a simple program. Technical issues like importing and exporting Data from external files will be treated (typically Excel and .txt files). One powerful aspect of Matlab is the Data plot; the course will cover also these features, the students will be able to use it for their reports and presentations. Finally, I’ll present an introduction of the GARCH models and show the technique to model financial return series such as LC, SC, T-Bond indexes etc. (We will use real Data). At the end of the course, student will be able to use the Matlab to import and read Data, to use built-in functions, to write and run small programs and to visualize results in different formats. They will be also able to compute bond prices giving the maturity and the interest rate.

LEARNING OUTCOMES

PREREQUISITES There are no prerequisite for this course. However, an introductory course to statistics and finance is recommended to understand applications.

COURSE CONTENT The course is divided into 5 sessions of 3 hours each (including a 15 min break).

Lesson N° Course content

1 Basic Elements of Matlab 1. Syntax rules, matrices and vectors. 2. Data import/Export.

2 Statistics Toolbox 1. Descriptive statistics (quantiles) 2. Univariate statistics (mean, variances, correlations).

MSC FINANCE

2012-2013

3

Financial Toolbox 1. Dates and returns/prices conversion in Matlab. 2. Box plots, histograms and scatters 3. Other graphics capabilities: legends and subplots

4

Econometrics Toolbox 1. Linear regressions: estimation and reporting 2. Bond pricing and actual value of money.

5

Applications 1. Example on expected events modeling with Matlab. 2. Garch models (if possible)

TEACHING & LEARNING METHODS The first 1.5 hours of each session is a lecture presenting one or more aspects of Matlab and its toolboxes. During the remaining 2 hours students complete an in-class assignment, which gives them the 1 opportunity to practice the software. Students are allowed to work in groups of three maximum; however groups of two are recommended so that everyone can practice. A MCQ will take place at the start of the 3rd session, and will concern the basics of Matlab.

ASSESSMENT METHODS The maximum total of 20 pts is decomposed as follows: 1 pt in each session for presence, 2 pts for each assignment and 6 pts for the MCQ .

RECOMMENDED READING All the books cited below are available as ebooks through EDHEC Library. General Introduction to Matlab:

McMahon, David, MATLAB demystified. Chapters 1 to 4. Quebec: Mc Graw Hill (2007). Applications to Corporate Finance and Accounting:

Anderson, Patrick L. Business economics and finance with MATLAB, GIS and simulation models. Chapters 10 to 12. Chapman and Hall, London (2005).

Applications to Quantitative Finance:

Brandimarte, P. Numerical Methods in Finance and Economics: A MATLAB-based Introduction. Wiley & Sons (2006).

Fusai, G. and Roncoroni, A., Implementing Models in Quantitative Finance: Methods and Cases. Springer (2008).

MSC FINANCE

2012-2013

NUMBER OF HOURS: 15 SEMESTER 1 & 2 INTERNATIONAL PROGRAMME– 1.5 ECTS COURSE COORDINATOR: Ozik GIDEON

COURSE OBJECTIVES The aim of this course is to teach students how to write a research report or an academic paper. We will cover the whole process from identifying a topic, reviewing the literature, structuring a thesis, collecting the data, programming a statistical procedure to writing in a clear and concise style.


Identify a research question

Identify data and methodologies to answer the research question

Write a research report and make research presentation

PREREQUISITES

COURSE CONTENT Lesson

N° Course content Requirements

1

Introduction to Research in Finance: How to identify a research question. Key elements of research in finance. Identify solution methodologies. Methods of problem solving. What to do when you get stuck with a problem. Recognizing problems that are too difficult to solve.

Passive

2

Sources of information. Analysis of the literature. Sources of data. Common problems with data. Software for research in finance. How to structure a research report. How to structure an academic paper. How to make a research presentation.

Passive

3 Presentation of a research proposal; ten minutes Active : Students prepare and discuss a research proposal

4 Presentation of research results ; twenty minutes Active: Students discuss the results of their research

5 Writing and delivery of final report ; 30 pages Active: Students prepare and submit a research report

TEACHING & LEARNING METHODS Lectures, readings, cases studies, exercises, prepared code

ASSESSMENT METHODS 50% in class presentation of research proposal, and 50% presentation of research results.

MSC FINANCE

2012-2013

NUMBER OF HOURS: 15 SEMESTER 2 INTERNATIONAL PROGRAMME– 1.5 ECTS COURSE COORDINATOR: Geert DEMUIJNCK - [email protected]

COURSE OBJECTIVES This is a business ethics course that addresses, to some extent, the ethical challenges in finance, which includes financial markets, financial services, and financial management. Business ethics is an important part of the education of any manager, but managers with responsibility in financial markets, financial institutions or financial management are confronted with many ethical issues that are different from those in other areas of business. The main objective is to make students aware of the relevance of ethical norms for professionals in finance. A second objective is to deliver helpful background knowledge for people who prepare the CFA exam. That financial activity be conducted according to moral norms is of great importance, not only because of the crucial role that finance plays in the personal, economic, political, and social realms but also because of the opportunities for large financial gains that may tempt individuals and financial institutions to act unethically and cause great harm. Many of the ethical norms in finance are embodied in law and government regulation and are enforced by the courts and regulatory bodies. Ethics plays a vital role, however, first, by guiding the formation of law and regulation and, second, by guiding conduct in areas not governed by law and regulation.

LEARNING OUTCOMES The aim of this course is to understand the ethical issues that arise in the various areas of finance and to develop an ability to resolve these issues effectively and responsibly. Upon successful completion of this course, students will be able to:

Understand the need for ethics in finance and the role of ethics in financial activity.

Understand the ethical principles of fairness in market transactions and the principles that justify the duties of people in financial roles

Understand the ethical principles that apply to the delivery of financial services and the operation of firms in the financial services industry.

Understand the duties of financial managers in corporations and the ethical principles that apply to corporate financial decisions.

Understand the ethical principles that justify corporate governance, including control of the corporation and the duties of officers and directors.

PREREQUISITES There are no specific prerequisites, except for the willingness to be guided by rational arguments and to scrutinize critically one's own and other people's moral opinions related to the economy and, more particularly, related to the financial markets and services

COURSE CONTENT

Lesson

N° Course content

1 Ethics today. Ethics and the economy

2 Ethics in finance: an overview + discussion of some small cases.


MSC FINANCE

2012-2013

3 Ethics and financial markets: concepts and cases (e.g. insider trading)

4 Ethics and financial services: concepts and cases. Ethics and investment decisions: what to think of SRI?

5 Ethics and individuals in the finance sector (+ discussion of the CFA code of conduct)

TEACHING & LEARNING METHODS Students are expected to attend every class. Since the course consists of five three-hour sessions, an absence from even one class involves missing a significant portion of the course. It is recognized, however, that students must miss a classes on occasion for good reasons. The policy if that if you cannot attend a class, notice must be given to the instructor by email either before the class period or on the next day after an absence. The course makes extensive use of Blackboard. In addition to material posted on Blackboard, this system will be used to submit all writing assignments. Students are responsible for learning how to gain access and work with files in Blackboard and for ensuring that the system has their preferred email address.

ASSESSMENT METHODS In addition to reading the assigned materials and participating in class discussion, the requirements for the course include one written assignment. The grade for the course is determined as follows: participation 40%, the writing project 60%.

RECOMMENDED READING Required readings: H. Shefrin & M. Statman, “Ethics, fairness and efficiency in financial markets”, Financial Analyst Journal, Nov./Dec.1993. L. Sharp Paine, “Managing for organizational integrity”, Harvard Business School Review, March/April 1994. Cases (read in 2011-12, other cases may be chosen in 2011-12)

D. F. Larcker & B. Tayan, “Sovereign Bancorp and relational investors: the role of the activist hedge funds”, Rock Center for Corporate Governance, Stanford Graduate School of Business, case CG-06, December 4, 2007.

David Millstone & Guhan Subramanian Oracle v. PeopleSoft: A Case Study

R. S. Kaplan & D. Kiron, “Accounting Fraud at WorldCom”, Harvard Business School, case 9-104-071, September 14, 2007.

L. Sharp Paine & C. M. Bruner, “Martha Stewart (A)”, Harvard Business School, case9-305-034, January 26, 2006.

Thematic recommended background reading will be posted on Blackboard. General background reading: Boatright, John, Ethics in Finance. Oxford, Blackwell, 2007. Boatright, John (Ed.), Finance Ethics: Critical Issues in Theory and Practice, Malden, Wiley, 2011.

MSC FINANCE

2012-2013

MSC FINANCE

2012-2013

NUMBER OF HOURS: 30 (5 sessions of 3 hours each) SEMESTER 1 INTERNATIONAL PROGRAMME– 7 ECTS COURSE COORDINATOR: Anne WITTE

COURSE OBJECTIVES A study of global demographics and economic history leads to an exploration of social and cultural values and how they drive migratory patterns, population profiles, women’s issues and technological and media literacy. The aim of the course is to consider the world’s cultures in terms of the social factors that impact economies and determine consumption and behaviour. These include public and private exchanges with particular consideration of the distribution of food, health, pollution, energy, education and social policy. An historical evaluation of how different value systems function economically and the contexts which allow for a successful combination of economic policy and growth allows for gaining perspective on social and cultural change in recent times and how values prompt prosperity, the use of technology and drive interpersonal change. This is an interdisciplinary course drawing from economic history, sociology, political science and cultural studies.


Identify the moral, historical and cultural factors impacting economies over history

discuss the major theoreticians on political economy

associate the work of public and private institutions (education, courts, sports, religion) with economic outcomes

recognize and anticipate how cultural, social and ethical priorities built within societies have enduring impact on economic behavior and the organization of trade

PREREQUISITES Three years of general business courses or Bac + 3 Business Administration

COURSE CONTENT

An Introduction to social and cultural perspectives on the economy

Types of Capital (Social Capital Theories & Bourdieu)

Cultural Factors: Hofstede, Trompenaar, Hall

The view of political economy: Landes, Weber, Sen,

The World Values Surveys (Inglehart & al.)

Trust and Cooperation (Fukuyama)

TEACHING & LEARNING METHODS Lectures, student study cohorts, Socratic dialogue, reading.

ASSESSMENT METHODS Participation 25% & Reading Presentation 25%

MSC FINANCE 2012-2013 - Edhec

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