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The view of corporate finance presented in this course stems from an analysis of two related issues: 1) how firms create value, and 2) how corporate finance facilitates the process of value creation. As part of this process, we will examine the factors that help determine financial strategy, thereby putting the design of financial packages in perspective. In particular, the course focuses on how corporate financing needs lead to the need for financial engineering and spur financial innovation. The course will use lectures and case analysis.
Credit Risk: Quantitative Modeling (1 unit) - Jeffrey Bohn
The second course in the credit risk series, this course will build on the foundation provided in the first course and provide a more in-depth presentation of how models are derived, estimated, and modified. This course is targeted toward students with strong backgrounds in mathematics and statistics. The course will cover default probabilities, loss given default, correlation, credit portfolio analytics, bond valuation, loan valuation, and credit derivative valuation. Emphasis will be placed on model building, model validation, and interpreting model output. Students will be required to do some high-level programming in a package such as Matlab. Some empirical testing exercises will also be part of the project work. The second course in the credit risk series, this course will build on this foundation and provide a more in-depth presentation of how models are derived, estimated, and modified.
Equity & Currency Markets (2 units) - Richard Lyons and Ron Kahn
This course reviews various aspects of equity and currency markets and provides models of and historical evidence on the average returns and volatility of returns on equities, on the trade-to-trade equity price beha
Choose 7 units of coursework:
Asset-backed Security Markets (2 units) - Nancy Wallace and Dwight Jaffee
This course extends the study of fixed-income securities to advanced topics on mortgage and other asset-backed securities. Students will apply the latest tools in fixed-income analysis and classic models in economics and finance to a critical evaluation of the structure and operation of the securitized bond markets. The course covers the basic mechanics of structuring deals for mortgage-related securities, credit cards, leases, and other debt markets and the risk management techniques employed in the securitization process for these assets. The course will also consider the valuation of pooled assets and derivative bonds using both Monte Carlo and option pricing techniques, an analysis of the trading strategies that are employed in these markets, and a study of the market microstructure of asset-backed security markets.
Dynamic Asset Management (2 units) - Hayne Leland
This course reviews portfolio theory and pricing models, risk models for international portfolio returns, models of optimal allocation of funds, role of exchange rate uncertainty, and criteria for judging the performance of managers and models. It includes different types of portfolios/instruments (equity, fixed income, currency, mortgages, non-traded assets) and different types of applications (investment funds, pension funds, insurance companies, bank investment portfolios, etc.). This course examines how strategies that systematically change exposure to different assets can achieve various investment objectives.
Behavioral Finance (2 units) - Terry Odean
Over the last 25 years, psychologists have come to better understand the processes by which people make judgments and decisions. They have identified common judgment and decision heuristics and the biases associated with these. An understanding of on
Advanced Corporate Finance (and Real Options) (2 units) - Christopher Hennessy
Investment
Textbook suggested: Investments, 7th Edition, by Bodie, Kane and Marcus, Irwin, 2006
business/finance/bkm/index.html
On
lecture notes: john.cochrane/research/Papers/notes.pdf
Applied Finance Project (Required) (1 - 3 units)
This is an applied project exploring an unresolved finance problem that is met in practice and involves the development or use of a quantitative financial technique. Participation requires prior approval of the supervising faculty member.
Independent Study (1 - 3 units) - Richard Stanton and Nancy Wallace
The MFE program requires satisfactory completion of 28 units of coursework. In addition to coursework, the MFE educational experience includes the following:
Financial Practice Seminars: MFE students are encouraged to attend weekly discussions held by finance practitioners. In the first term speakers discuss jobs available to graduates of the MFE and the skills needed to contribute to a firm's mission. In the second term, speakers provide insights into the way the financial world is changing: new products and needs; evolving da
Applied Finance Project: MFE students are required to complete an applied finance project that develops or uses quantitative finance tools and techniques learned in the program or internship.
Internship Program: While not required for graduation, students are encouraged to have an internship during the break from mid-October to mid-January. The MFE Office and the Haas Career center work with students to locate opportunities for students.
Resource
1. Overview: events/FinancialEngineeringOverview.pdf
2. Video£º2007/01/12553/L01/index.shtml
3. Working Papers: MFE/papers.html
4. Detailed Syllabi: courses/Syllabi
finance/academic.cfm?doc_id=1226 fen48/spec-report/capstone/capstone.html
5. Fund Management notes: ~musto/funding.html
6. interest rate derivative£º
Articles from US Fed:
Instructions for the Central Bank Survey of Foreign Exchange and Derivatives Market Activity, 2007
derivative instruments 2005
Do Nonfinancial Firms Use Interest Rate Derivatives to Hedge? 2005. publications/economicperspectives/2001/3qepart4.pdf
7. Recommended Reading for The Master's program in Financial Mathematics in University of Chicago
Below is a list of recommended texts (several of which will be used in the program). The book by Boas contains most of the mathematics that entering students should be familiar with, while the early chapters in Hull's book are a good introduction to the financial products that are the basis of study for the program.
Author
Title
Mary L. Boas
Mathematical Methods in the Physical Sciences
Sebastien Bossu and Philippe Henrotte
Finance and Derivatives: Theory and Practice
John C. Hull
Options, Futures and Other Derivatives
Neil A. Chriss
Black-Scholes and Beyond: Option Pricing Models
P. Wilmott, S. Howison, J. Dewynne
The Mathematics of Financial Derivatives
Patrick Billingsley
Probability and Measure
Jonathan E. Ingersoll, Jr.
Theory of Financial Decision Making
Tim Weithers
Foreign Exchange: A Practical Guide to the FX Markets
Some other recommended readings. These are more to get a feel for how business works on Wall Street and not everything is centered around quants. Here are Neil Chriss' picks:
Author
Title
Edwin Lefevre
Reminiscences of a Stock Operator
Warren E. Buffett
The Essays of Warren Buffett: Lessons for Corporate America
Benjamin Graham, Jason Zweig
The Intelligent Investor: The Definitive Book On Value Investing
Daniel Reingold, Jennifer Reingold
Confessions of a Wall Street Analyst: A True Story of Inside Information and Corruption in the Stock Market
Joel Greenblatt, Andrew Tobias
The Little Book That Beats the Market
Joel Greenblatt, Jr.
You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits
Peter Kaufman, Warren E. Buffett, Charles T. Munger
Poor Charlie's Almanac Expanded Second Edition. The Wit and Wisdom of Charles T. Munger
John A. Tracy, CPA
How to Read a Financial Report: Wringing Vital Signs Out of the Numbers
John Burr Williams
The Theory of Investment Value
Mark Rubinstein
A History of the Theory of Investments: My Annotated Bibliography
Some picks by Robert Frey:
Author
Title
Michael Lewis
Moneyball: The Art of Winning an Unfair Game
Edwin O. Thorp
Beat the Dealer: A Winning Strategy for the Game of Twenty-On
William Poundstone
Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street