Fixed Income Securities
Audience: MBA, Masters in Finance, Undergraduate level
This course is an introduction to fixed income markets and the analytic tools used by participants in these markets. Fixed income markets have been changing dramatically over the past few years, especially after the financial crisis. New regulation, aggressive monetary policy that led to zero nominal rates, large expansions of government debt, new empirical behavior of Treasury securities, design of new securities have had and continue to have major impact on how fixed income markets work. By its nature, fixed income is a very broad subject that would literally take years to cover in depth. Of necessity, this course needs to be selective. To strike a balance between coverage and institutional details we will focus primarily on the fundamental concepts underlying fixed income markets; with a solid grasp of the underlying theory, it should be much easier to pick up the rest while working in the industry. We will also have a strong emphasis on applications using realistic examples and cases. The course will be fairly quantitative with lots of formulas and number crunching. However, students will get exposure to advanced real-world models and valuation techniques used by many banks and hedge funds which will give them an edge in the competitive world of “Wall Street.”
Fall 2010, Winter 2011, Fall 2011, Spring 2012
Instructor: Liu Yang, Audience: MBA, Fully-Employed MBA
The objective of this course was to provide students with the understanding and tools needed to value companies and assess the value-added of investment decisions. First, students were introduced to two commonly used approaches that build the foundation of all valuation – the intrinsic valuation and the relative valuation. During the course, students explored two types of discounted cashflow models –the WACC-based approach and the Adjusted Present Value approach. The class also discussed the implementation and limits of the market multiples method, and establish the link between the intrinsic and relative valuation. A major part of this course was spent applying these methods to practice in various valuation scenarios. Students were introduced to stand-alone firm valuation, valuation for mergers and acquisitions (including leverage buyouts), IPO valuation and private firm valuation. Furthermore, real options and their application in corporate investment, focusing on how to identify, conceptualize and value them were discussed. Students were introduced to different valuation techniques, including Monte-Carlo simulation, binomial trees, and the Black-Scholes model.
Introduction to Credit Markets,
Instructor: Holger Kraft, Audience: Master of Financial Engineering
The objective of this course was to introduce students to credit risk modeling and to the pricing of credit derivatives. One of the goals was to make students familiar with the characteristics of these contracts and to clarify the relations between them. The class introduced students to the two main approaches to modeling credit risk (firm value models and reduced‐form models). The advantages and disadvantages of these approaches in terms of tractability, practical relevance, and the typical applications of these models were highlighted. Student were introduced to the Cox process frameworks and shown, in particular, how affine term structure models can be extended to capture credit risk. Examples such as the pricing of corporate coupon and zero bonds as well as credit default swaps were discussed. Furthermore, the calibration methods of affine models for CDS spreads are were discussed, and the students were introduced to multi‐name credit derivatives. The students were introduced to key concepts, such as default stopping times, and the distribution of the default process. We also discussed risk‐neutral valuation in the presence of default risk. The objective was to provide the students with a toolbox that can be used to study a wide range of credit derivatives products. Furthermore, students learned about structured credit products, such as collateralized debt obligations, basket, and index and tranche swaps. Valuation methods such as the copula approach and base correlations were thoroughly discussed, as well as alternatives to this approach such as models using Markov chains or self‐exciting processes.
Security Analysis and Investment Management
Instructor: Hanno Lustig, Audience: MBA
The objective of this class was to provide students with the quantitative tools to manage a portfolio of equities and other assets. The class aims conveyed the insights of modern portfolio theory and investment management. In addition, the class drew on recent advances in the field of empirical asset pricing. The class focused mostly, but not exclusively, on equities and covered everything from performance analysis of mutual funds and hedge funds to pricing of stocks. At the core of the class was to teach the students an understanding of systematic risk exposures in different asset classes, because understanding these different types of systematic risks is not only critical in investment management but also helpful for understanding what went wrong in the financial sector during the 2008 crisis and how to be successful in finance in the job market.
Fall 2009, Fall 2011
Instructor: Walter Torous, Audience: Master of Financial Engineering
At the core of this course was the study of mortgages, mortgage-backed securities, and
other asset-backed securities. The objective of this course was to give students a deep understanding of securitization as it is an important innovation in U.S. and global capital markets. The process of securitization allows highly illiquid securities such as mortgages, automobile loans and credit card receivables to be transformed into more liquid financial instruments. Securitization also allows intermediaries to segment the risk and term structure characteristics of the underlying assets into a wide variety of alternative structures, thus expanding the domain of suitable investors. Students were also introduced to the risk management techniques used in both the pooling and slicing (tranching) phases of securitization. The course also considered the numerous problems which arise in pricing pooled assets using Monte Carlo and option pricing techniques as well as an analysis of the trading strategies that are used in these markets.
Security Markets and Investments
Instructor: Walter, Audience: Fully Employed MBA
The objective of this course was to provide students with a strong foundation for all the fundamental concepts in investments. Topics included discounting and present values, the valuation of bonds, risk and return, the construction of optimal portfolios, asset pricing models, as well as an introduction to futures and options. The course aimed to strike a balance between theoretical paradigms and the underlying empirical evidence.
Security Markets and Investments
Instructor: Mark Grinblatt, Audience: Fully Employed MBA
The objective of this course was to help students develop an understanding of the fundamental concepts in capital markets and investments. Topics included valuation, risk and return, portfolio construction, fixed income instruments and interest rate risk, and derivatives. At the core of this course was to convey a deep understanding of financial markets, how they work and how securities are priced in the market.