MSc Finance

The perceived wisdom is that the only thing that you can predict is that predictions can't be relied upon. However, there are countless people working in the financial sector who make six figure bonuses by using models to make sense of what will happen at some time hence. By arriving at a "best guess" through the use of tools and techniques, Financial Modelling is as close as you can get to a reliable crystal ball.

Financial modelling i/s the art of creating useable, "live" software implementations of relevant theoretical financial models. This module offers you a practical, hands-on introduction to this important field.

Our main software environment is the spreadsheet package MS Excel with its in-built programming language VBA, both standard tools in the finance industry. There are no programming prerequisites; all the necessary skills are developed along the way. The emphasis is on developing the ability to create practical software implementations that are reliable, useable, and maintainable.

The module covers the following areas:

• Practical competence in setting up and maintaining reliable software implementations of financial models
• Practical design skills in making the financial model easy to use by outside parties
• Experience in the systematic testing of a financial model for faults
• Experience in using financial models in a simulation context and interpreting the results

Core topics will include:

• Recognising, rating and ranking risk
• ERM concepts and theories
• Critical analysis of the ERM framework
• Risk governance and compliance
• Acceptable risk and risk appetite
• Risk responses and internal control
• Organisational context and risk
• Implications of Risk Management

The module is an introductory graduate-level econometric course covering the use of quantitative and statistical tools in the area of applied finance. Emphasis of the module is placed on the practical applications of econometrics. (15 credits)

A set of purpose-designed, computer-based exercises will enable you to develop a good understanding of statistical properties of financial data and the skills of empirical modelling analysis in the area of finance. Furthermore, this module will improve your understanding of theoretical arguments in finance and set up the link with relevant industry practice.

The main topics covered in the course are:

• Statistical Fundamentals
• Introduction to Datastream
• Introduction to econometric software (E-views)
• Two-variable regression (OLS model)
• Multiple regression and interpretation of regression results
• ARCH and GARCH
• Application in finance

This module will provide you with an appreciation of the underlying theoretical frameworks and concepts behind financial reporting, along with a sufficiently detailed knowledge of its processes, to enable successful analysis of complex financial statements. The focus is on key accounting issues and their impact on the interpretation of financial statements, as opposed to the mechanics of bookkeeping.

The module provides a broad base from which to explore further modules in the programme and is designed to build your confidence and capabilities in dealing with and discussing financial information.  

This module aims to:  

• Explore the purpose, nature and objectives of financial reporting
• Examine the conceptual and regulatory frameworks of financial accounting, including the international context
• Introduce you to critical thinking skills through the critical analysis of the key qualitative characteristics of financial reporting and fundamental assumptions
• Develop understanding of the process of generating financial statements and how transactions are recorded and reflected
• Develop ability to interpret financial statements, building the means to critically assess, draw effective conclusions and make decisions from that interpretation
• Increase appreciation of contemporary issues in financial reporting
• Develop your financial literacy, skills and confidence to discuss financial information

 

The module aims to introduce fundamental financial theories including investment choices under uncertainty, asset pricing and portfolio management. Different asset pricing models are studied to provide critical understanding of the relationship between risk and return, and equilibrium as it relates to an arbitrage or no-arbitrage pricing approach.

Experience will be gained in constructing an optimised portfolio to build the ability to apply theoretical knowledge in practice. Through studying the programme, you will be able to analyse quantitative problems in both academic and practical contexts, and to think in 'Financial terms'.

The module covers the following areas:

• Overview of financial markets and financial assets
• Time value of money
• Investment choice under uncertainty and its application to insurance
• Portfolio theory and diversification
• Capital Asset Pricing Model
• Arbitrage Pricing Model and Fama-French Three Factor Model
• State Pricing Model and No-arbitrage Principle
• Market Efficiency and Behavioural Finance

This module equips you with a comprehensive understanding of how behaviour from individual to firm to industry translates into the dynamics that create market situations as we see them. It will also enable you to define the role the regulator takes to ensure that the market and the economy move towards socially efficient levels of activities. Although the aim is to focus on the financial sector, the module develops a firm foundation of the theoretical underpinnings of regulation and draws examples from other industries to show the parallels in the financial services sector. You will analyse case examples in class to see how financial regulation differs across Europe, US and Asia, and to understand the global nature of the impact created by different regulatory frameworks.

This module aims to:

• Provide a solid theoretical grounding to analyse behavioural patterns that determine market movements
• Develop understanding of the role of regulation, and when it is justified from the social point of view
• Promote understanding of regulatory intervention on various levels, individual, firm and industry, in order to achieve social goals

This module is an introduction to game theory, and draws its applications mainly from finance. Games will be played in class to illustrate theoretical concepts. You will learn how to recognise and model strategic situations, to predict when and how your own actions will influence decisions of others, and to exploit strategic situations to their own benefit. 

Specifically, you will become familiar with game theory approaches to bargaining, conflict (competition) and negotiation and the impact of asymmetric information on financial decisions. In doing so, you will develop the ability of strategic thinking in encounters with other individuals modelled as games and as participants in broader markets involving many individuals. The general emphasis of the module is on methods. However, some philosophical aspects will be discussed and reflected through various topics.  

This module aims to:  

• Present fundamental concepts in game theory and their practical implications
• Introduce different formats of strategic interactions and their equilibrium outcomes
• Examine the methods of game-theoretical analysis in settings of business and finance
• Sharpen understanding of strategic situations (such as auctions) in finance and its optimal playing strategies
• Help develop abilities in strategic thinking

On the one hand it promotes a deep understanding of the theoretical construct of portfolio management, but provides a solid foundation for understanding fund management in general given various different types of objectives, e.g. for pension funds, for mutual funds and for private individuals.

It exposes the world of the portfolio manager, including the surrounding business and regulatory environment. It will give you hands-on experience in implementing these techniques, through a simulated trading platform especially designed to promote team work.

The module covers:

• Principles and policy, construction, management and protection of portfolios
• Asset Allocation: strategic vs tactical
• Overview of problems faced by portfolio managers: liquidity, risk management, benchmarking and alpha, regulatory environment, portfolio construction
• Introduction to Style Investing
• Implementing a portfolio: Introduction to StockTrak
• Case study: Boots PLC Pension Funds (set in early 2000)
• Portfolio construction: overview
• Active vs passive investing
• Portfolio risk,  risk budgeting and performance measures
• Return attribution
• Portfolio protection: hedging
• Absolute return strategies
• Manager selection, fund of funds
• Value Investing, Quantitative approach
• Passive investing:  Principles of ETF
• The Asset Management Business
• Creating financial products
• Behavioural Finance, ethics, SRI, and marketing of financial products
• Investment planning: personal and family offices

It provides a framework for understanding the economic and institutional policy dynamics that affect the bond market and its prices, and addresses strategies of portfolio management for various different portfolio objectives, including asset-liability management and hedging strategies within companies and pension funds. 

The module covers the following areas:  

• Economic understanding of relationship between the yield curve and bond prices, including interest-rate movements in standard tree models of the yield curve
• Understanding of the forces that lie behind hedging and immunisation strategies for bond portfolios, and computational competence in implementing such strategies
• Intuitive grasp of portfolio management techniques, using this asset class

Over the past 15 years, there has been a tremendous boom in the private equity industry. The pool of US private equity funds' partnerships specialising in venture capital, leveraged buyouts, mezzanine investments, and distressed debt, has grown from $5 billion in 1980 to over $450 billion in 2007.

Private equity's recent growth has outstripped that of almost every class of financial product. While the growth in private equity has been striking, the potential for future development is even more impressive. Despite its growth, the private equity pool today remains relatively small.

For every dollar of private equity in the portfolio of US institutional investors, there are about $40 of publicly traded equities. The ratios are even more uneven for overseas institutions.

Recent economic events have had a strong impact on the PE industry. Deal volume has fallen dramatically as credit has tightened, and the types of deals now being done are very different from those done just two years ago. But, even in difficult times, there are opportunities, some outside the realm of traditional buyouts.

This course is designed to help you develop the skills to exploit these opportunities. In addition, there will be a detailed discussion of the phenomenon of Sovereign Wealth Funds. They have become an extremely important source of investment money, they apply a number of investment techniques from sophisticated PE firms and they are very controversial: is there only an economic interest at play? This topic also extends the international dimension of discussion on PE.

This module is ideal if you are intending to specialise in the area of entrepreneurial finance and as such is compulsory for students taking this specialism. The module must be taken together with the Corporate Finance module, to benefit fully from its valuation and financial analysis aspects.

The module seeks to deepen your understanding of corporate finance: it emphasises the relevance of the intellectual frameworks used to analyse corporate finance problems (incomplete contracting theory, agency problems, etc.) for the private equity industry.

The teaching approach is analytical rather than mathematical, with intuition and practical application (including the heavy use of case studies) of theoretical concepts emphasised throughout. However, this module introduces a wide array of valuation methodologies, which by nature are highly numerical.

These range from approaches commonly seen in practice (e.g. the use of comparables and the 'venture capital' method) to those less frequently employed but likely to be useful nonetheless (the use of Monte Carlo simulations and option pricing techniques). The course emphasises not only the mechanisms employed, but also how to clearly communicate the strengths and limitations of each approach.

The module has been designed to:

• Provide an analytical framework for evaluating the strategic and financial impact of private equity (PE) and venture capital (VC) in a modern economy
• Present a critical examination and analysis of the practical management and exit issues related to PE
• Present the PE and VC 'life cycles', from selection of targets, to valuation techniques to exit strategies
• Review and apply the key concepts and tools of corporate finance in the context of the private equity industry
• Build an appreciation of the valuation process in the private equity setting
• Assess the new phenomenon: Sovereign Wealth Funds and their role in the world economy

 

The teaching approach is analytical rather than mathematical, and the intuition and practical application (via the heavy use of case studies) of theoretical concepts is emphasised throughout the module. Through the selection of case studies, the module introduces various dimensions of international business. You will compare the Anglo-Saxon business model with a continental one (based on Schneider-Square D case), analyse accounting, operating and transactional exposure risks created in international aspects of corporate finance and apply rigorous analytical project appraisal methodologies (developed by LEK Consulting) to companies of your choice.

The discussions on valuation and financing of corporate finance take into account the changed risk expectations of investors after the Credit Crunch.

This module aims to:

• Develop a framework for corporate financial decision-making
• Provide a solid grounding in the principles and practice of financial management
• Analyse the various sources of finance available to organisations
• Develop the understanding of the role of capital markets as a source of finance for organisations
• Analyse the optimal capital structure of firms
• Create an understanding of models used in valuation of fixed income instruments, such as bonds
• Equip you with the ability to select and apply appropriate corporate valuation techniques
• Alert you to international aspects of corporate finance transactions
• Provide you with technical tools to analyse international M&A transactions
• Enable you to consolidate and extend the seemingly different skills acquired in managerial decision-making and perational strategy to apply in practical business context
• Provide opportunities to acquire key quantitative skills

Core topics will include:

• An overview of Basic Principles of Valuation
• An overview of alternatives to NPV (IRR rule, pay back rule)
• Bond pricing
• Company Valuation
• Cost of Capital
• Mergers and Acquisitions
• International Finance and cross-border valuations
• Decision Trees and real options: valuing managers' flexibility

This is an introduction to the analytical process that allows assessment of the intrinsic value of a financial asset. To evaluate this, a wide range of inputs is used, including a range of primary information about the issuing firm and its environment.

• A systematic understanding of how the financial and strategic position of a business is reflected in the company's financial statements
• Finding, selecting and organising relevant corporate data for a given company
• Conceptual understanding and technical competence in developing and using a comprehensive range of valuation techniques for equity valuation
• Assessing and evaluating the relative merits and limitations of different valuation tools in a given business context, and the ability to make informed pragmatic judgements about the quality of the resulting value estimates
• Conceptual recognition of typical behavioural patterns in financial markets, and hence a personal awareness of potential sources of mis-pricing and the need for strong mental discipline
• Conveying complex financial information in a concise format that effectively communicates key findings to the investor

The mismanagement of financial risks can have serious adverse effects on business performance, as demonstrated by financial disasters such as the collapse of Barings Bank, the S&L crisis and the recent credit crunch.

• Demonstrate the need for financial risk management in a broad macroeconomic context, encompassing good corporate governance and risk sensitivity
• Present recently developed models describing how the mutual feedback between financial markets and real activity magnifies shocks to the economy
• Examine the implications of Basel II for financial institutions
• Discuss the roles played by financial market regulators (FED, FSA, UKLA)
• Reinforce the concepts of accountability, ethics and professionalism
• Explore the foundations of risk management, considering both market risk and credit
• Analyse professional techniques and applications including mathematical issues in the measurement and management of credit and market risks
• Equip you with the ability to use methods of risk measurement
• Provide opportunities to acquire key quantitative skills in risk management

This course will introduce you to a branch of structured finance focussed on transferring risks from one entity to another through the structuring of securitisations, and how this also provides enhanced liquidity and a source of revenue for investment banks.

Especially because the recent financial crisis developed from underperformance within structured products, you can benefit from a thorough understanding of the mechanics of securitisation, the complexities of the instruments and the global business, market and regulatory environments within which this financial activity operates.

For both investors and corporations, such knowledge will be useful in recognising the opportunities and threats present in the bid to manage risk and returns through innovative products and processes.

This module aims to:

• Develop a deep understanding of securitisation and the wide application of its use in finance and investments
• Analyse the various methods of credit enhancement as well as the structures forming the foundation of structured products
• Illustrate the global market and regulatory environments affecting the development of this industry, linking it with the prospects for the finances and investments of corporations and banks
• Instil an analytic understanding of the political and economic framework in the various global transactions between public and private institutions, including the rating agencies

In avoidance of these adverse effects financial institutions, such as banks or insurance companies, devote considerable resources for the development of the financial risk management process, including corporate governance. We present the existing and proposed approaches, discussing their usefulness and limitations. Attention is paid to regulation, accountability, ethics and professionalism.

We show that the existing feedback between financial markets and real economy may translate small shocks into large and persistent consequences. Moreover, we show that these feedback effects are important in understanding financial crises.

This module aims to:

• Demonstrate the need for financial risk management in a broad macroeconomic context, encompassing good corporate governance and risk sensitivity
• Present recently developed models describing how the mutual feedback between financial markets and real activity magnifies shocks to the economy
• Examine the implications of Basel II for financial institutions
• Discuss the roles played by financial market regulators (FED, FSA, UKLA)
• Reinforce the concepts of accountability, ethics and professionalism
• Explore the foundations of risk management, considering both market risk and credit
• Analyse professional techniques and applications including mathematical issues in the measurement and management of credit and market risks
• Equip you with the ability to use methods of risk measurement
• Provide opportunities to acquire key quantitative skills in risk management