Finance Courses
Introduction to Finance
This is an elective course in Finance offered to the second years.
In this introductory course we will introduce the students to a world looked at from a finance manager’s point of view. The three broad sets of decisions that finance managers undertake are—decisions on where to invest the resources or funds that the business has raised, either internally or externally (the investment decision), decisions on where and how to raise funds to finance these investments (the financing decision), and decisions on how much and in what form to return funds back to the owners (the dividend decision). The course will include the central concepts of modern finance: basic accounting principles and financial statements analysis, net present value, valuation models, efficient markets, and the trade-off between risk and return, fundamentals of capital structure and an introduction to corporate dividend policies and their implications for valuation. The course uses a mix of theory and practice for exposition.
List of topics covered:
1) Basic accounting, Balance sheet and income statement analysis, cash flow analysis and financial models
2) Capital Budgeting: Discounted cash flow analysis, Time value of Money, NPV, IRR and other investment rules, Capital investment decision making
3) Analysis of Risk – sensitivity and scenario analysis, break even analysis, Real options and capital budgeting
4) Bonds and bond valuation, government bonds, corporate bonds, pricing of bonds, risks associated with investing in bonds, bond yields and their determinants and the yield curve.
5) Stock valuation – methods of valuation, ratios for comparisons, introduction to stock markets, exchanges and trading
6) Risk and return – Market history, CAPM
7) Weighted Average Cost of capital
8) Market efficiency
9) Capital structure – Basics, use of debt and valuation and capital budgeting for a levered firm
10) Dividend Policy
Financial Markets and Asset Pricing
This is an elective course in Finance offered to the third years.
This course focuses on the pricing of financial assets. The emphasis will be mostly on equity markets, but later into the course options (puts & calls) are also discussed. The course revolves around different models or methods, that might help us identify mispriced financial assets which in turn could help us design a reasonably good portfolio. These methods and models have some kind of economic or accounting rationale and some of them are based on seminal papers published in the last century. Despite all that, a student in this course will eventually come to realize that no one model/ method is enough to help us understand the true value of a financial asset. In fact, it is extremely hard to explain why a given object has a particular value and whether that object is overpriced or underpriced. Renowned statistician, George Box once said – “all models are wrong, but some are useful”. That is what students would do in this course – study some models that have been useful in the context of asset pricing. To be specific, students will study Markowitz portfolio selection, index models, capital asset pricing model (CAPM) and its variants, arbitrage pricing theory, Fama-French three-factor model, efficient market hypothesis, equity valuation models, and later they will study options, put-call parity, and Black-Scholes’ options pricing.
Finance and the Economy
This is an elective course in Finance offered to the third years.
This is an advanced undergraduate elective examining the role of finance and financial institutions in the process of economic growth and development. We will start with a review of the various channels linking finance and economic growth, as well as the role of institutions and politics. Subsequently, the course will look at the evolution of finance in specific countries and the factors which might have facilitated (or served as a detriment) the development of financial institutions. The next part of the course will study the ability of various financial institutions to serve as efficient intermediaries and examine barriers to credit access faced by firms and households. The last part of the course will examine responses to financial crises, aggregate effects of such crises, and household finance.
Much of this course will involve studying, evaluating and critiquing the empirical evidence in existing research investigating the relationship between finance and economic growth. Students in this regard are be expected to have a solid foundation in multivariate regression analysis. Homework assignments will also require students to test economic hypothesis using ordinary least squares to gain first hand experience about the relationships they study in the class. The class will inherently be discussion based — students are expected to have read the paper assigned for the class beforehand and actively contribute to the class discussion.
Advanced Financial Management
This is an elective course in Finance offered to the third years.
This is an advanced course in Corporate Finance. It provides the analytical tools and their application to specific corporate investment and financing decisions.
The basic analytical tools are:
Spread sheet modelling and forecasting corporate cash flows.
Cost of capital determination based on risk return relationship of financial securities.
Corporate valuation using forecasted cash flows and cost of capital.
These tools are applied to investment and financing decisions in the following context:
Mergers and Acquisitions
Project and Balance Sheet Financing
Private Equity and Leveraged Buyouts
Venture Capital Financing
Financial Distress and Capital Restructuring
International Investments
Financial Risk Management
Financial Markets and Institutions
This is an elective course in Finance offered to the third years.
This course will enable students to understand the role of financial markets and institutions in shaping the economic and business environment of the nation. With the help of some simplifying frameworks and models, the students will be equipped to develop a series of applications of principles from finance and economics that explore the connection between financial markets, financial institutions and the broader economy. Students will learn how the term structure of interest rates, stock and derivative market developments and currency fluctuations drive the financial flows. Students will study the role of financial institutions such as central banks, commercial banks, investment banks, insurance companies and mutual funds in facilitating the flow of funds in the economy. Keynesian IS-LM theory and the loanable funds theory provide the theoretical background for the course and help students develop simple analytical frameworks to study the interaction of individuals, firms, governments, markets, financial institutions, and the aggregate economy. The students will get an introduction to the role of regulation in the overall functioning of financial markets and institutions in the economy.
International Finance
This is an elective course in Finance offered to the third years.
The objective of this course is to provide a framework for making corporate financial decisions in an international context. Managing an international business or one exposed to global competition requires an understanding of international financial instruments, markets, and institutions. This course seeks to provide a working knowledge of these issues. The stress will be on an understanding of the intuition behind the theories, not on mathematical proofs or on replicating empirical results from the literature. The course will not shy away from complex ideas but will try to make the ideas as accessible as possible. Solving mathematical financial problems is an important part of the course.
The course will address the following main topics: national income accounting and balance of payments; global economic developments and outlook; growth and slowdown of globalization; international financial systems; foreign exchange market and exchange rate determination; foreign currency derivative instruments; arbitrage and international parity conditions; risks in global finance (e.g., foreign exchange risk and country risk), and the management of foreign exchange risk with forwards and options.
