Course description
Course Summary
The course specialises in security/portfolio investment and is structured around the syllabus of the Institute of Investment Management Research. The emphasis is on issues related to investment in capital markets such as investment strategies, the evaluation of investment performance and the use of financial statement information in evaluating company performance.
The course allows students whose career choices lie within financial institutions or in financial management to develop the relevant analytical tools and techniques necessary for such a career. The course should also be of interest to applicants who are already practitioners in the financial field.
Course Details
All our MSc programmes operate on the academic year basis, commencing in September and ending in the following September. Each degree includes both core and optional taught modules, which are assessed by a combination of coursework and final examination. The taught units are followed by a dissertation if the appropriate standard is reached in the taught component. Students can opt to take only the taught units and graduate with a postgraduate diploma, or may initially register for the diploma, and if they do well in the taught units, may to proceed to the dissertation for the MSc.
Compulsory Modules
All students take a one-week introductory course in mathematics and statistics
* Modelling Financial Decisions and Markets
* Advanced Financial Theory and Corporate Policy
* Security Investment Analysis
* Dissertation
Specialist Options (two from):
* Financial Engineering
* Money and Banking
* Financial Accounting
* Development Finance
* Mathematical Finance
Modelling Financial Decisions and Markets
This unit provides a firm foundation in the theory and practice of econometric modelling of financial decisions and markets. The first half of the course is mainly theoretical, with examples of academic and professional applications used to illustrate and elucidate; the second half reverses the emphasis. The emphasis throughout is on the rationale of the econometric methods analysed and their use in practical applications.
Advanced Financial Theory and Corporate Policy
This unit provides a rigorous grounding in the theory and practice of corporate finance. This is achieved by giving particular attention to testable propositions and to the literature which has developed empirical tests of fundamental elements of modern finance theory. In particular, this module provides a thorough understanding of the three major decisions of corporate finance: the capital investment decision, the capital structure/financing decision and the dividend decision, within the framework of an uncertain operating environment. Both normative and positive aspects of the theory are examined, together with the supporting descriptive and empirical evidence. The emphasis is upon applications of the principles.
Security Investment Analysis
This unit provides a comprehensive and critical review of the various approaches to security investment analysis. The emphasis is on the use of financial information by external decision makers in a variety of decision contexts. In particular, the unit focuses on ratio analysis and the use of balance sheet information; the theory and practice of valuing assets such as equity and fixed interest securities; portfolio management and evaluation of portfolio performance; and credit decisions by banks and financial distress prediction. Those concerned with, or interested in, investment analysis and fund management will find this unit particularly interesting.
Financial Engineering
This unit covers the theory and practice of financial engineering, with an emphasis on the pricing and hedging of derivative securities. The contents will encompass the definitions of the major classes of derivative instruments (futures, options, swapts), their use in complex deal structuring, their uses in risk management, and the mathematical theory of their valuation. The course will include coverage of interest rate modelling and exotic options.
Money and Banking
This unit explores the links between money, financial intermediaries and the economy. In particular, the unit seeks to address the following questions: can monetary policy be used to affect real economic variables? What are the possible sources of non-neutrality of money? How do monetary authorities conduct monetary policy? Why do capital markets sometimes fail to allocate credit efficiently? Can banking institutions improve the efficient allocation of credit? The unit investigates whether, in the light of recent banking failures, there is scope for tighter regulation and/or supervision. The latest developments in international banking are also discussed.
Financial Accounting
This unit provides a critical review of the principles that underpin accounting standards in the UK, at the Financial Accounting Standards Board in the US, and at the International Accounting Standards committee. It also examines the limitations of financial reporting in capturing all the aspects of company performance; the role of accounting information in the valuation of enterprises; and the role which a common set of accounting standards can play in international business.
Development Finance
This unit provides an in-depth examination of the finance-growth relationship. Theoretical models and empirical evidence relating to the role of financial factors on the growth process will be discussed. The concepts of financial repression / liberalisation and the role of financial sector policies in promoting the development of the financial sector itself as well as savings, investment and growth will be examined with particular emphasis on developing countries.
Mathematical Finance
This unit covers the interface between mathematics and finance, imparting the main concepts and tools of derivative security valuation and portfolio optimisation in a stochastic setting. It starts with a description of basic probability spaces and their use in modelling finite, discrete-time financial markets, and moves on to cover continuous-time finance, using Brownian motion driven stochastic processes to describe security price dynamics. Topics covered will include the Black-Scholes and Cox-Ross-Rubinstein option pricing models, Merton's intertemporal portfolio selection problem (as an application of stochastic optimal control), term structure modelling using instantaneous forward rates, and numerical methods for derivative pricing and portfolio optimisation.
Dissertation
Recent examples of dissertations by students taking this course include:
* Modelling and forecasting risk using value-at-risk; evidence from 12 EU stock market indices
* How to deal with the pensions crisis in China
* The term structure of interest rate
