Quantitative models for business management (2019/2020)

Course partially running (all years except the first)

Course code
4S003751
Name of lecturer
Cecilia Mancini
Coordinator
Cecilia Mancini
Number of ECTS credits allocated
9
Academic sector
SECS-S/06 - MATHEMATICAL METHODS OF ECONOMICS, FINANCE AND ACTUARIAL SCIENCES
Language of instruction
English
Location
VICENZA
Period
primo semestre magistrali dal Sep 30, 2019 al Dec 20, 2019.

Lesson timetable

Go to lesson schedule

Learning outcomes

The course aims at providing the student with tools for the financial portfolio managing of companies operating in international markets. In particular the course will focus on: some basic concepts characterizing the international markets; some mathematical tools for both the quantification of the securities risks and the optimal financing and investment planning; some software tools for supporting the decision process. At the end of the course, the student should have to be aware of concepts which are fundamental for companies investing or seeking fundings on international markets. For example she sholud have understood: the relationships between interest rates and exchange rates; the functioning of some derivatives on such rates; the types of risk inherent in domestic and foreign bonds and equities and their connection with the exchange rates risk. Furthermore, the student should have to be able to apply principles and criteria, and to use mathematical and software tools for the assessment and the choice of financial opportunities.

Syllabus

PREREQUISITES:

1) A good working knowledge of mathematical analysis (limits/derivatives/integration). The ability to solve standard first and second degree equations/inequations.
2) A good working knowledge of basic statistics (random variables, probability distributions, law of large numbers, central limit theorem, statistical tests, expected values/moments, maximum likelihood estimation, linear regression).

TENTATIVE PROGRAMME:

1. Currency risk
Domestic and foreign term structures of interest rates: [Notes]
no arbitrage valuation [Notes]
spot rates and forward rates [Notes]
interest rates swaps
exchange rate determinants [Madura, ch. 4]
currency derivatives [Madura, ch. 5, Jacque Ch.7, Notes]
forwards contracts, interest rate parity;
currency swaps;
stock options and currency options
exchange rates forecasting [Madura, ch. 9]:
inflation, interest rates and exchange rates [Madura, ch. 8]
hedging currency risk examples:
Managing transaction exposure [Madura ch 11]

2. International diversification [Jacque, Ch.23, Notes]
Motivations for diversification;
portfolio allocation in many assets;
CAPM main indications;
international portfolio allocation:
modelling equity risk

3. International capital budgeting [Madura, ch. 14]
The cost of capital; [Madura, ch. 17]
the NPV model;
the APV model;
Monte Carlo simulations;
sensitivity analysis.

REFERENCE TEXTS AND EDUCATIONAL MATERIAL

Other than the tree indicated books,

Additional material regarding in-depth information on specific parts of the reference texts will be provided and made available online

The notes of the lessons held in class will be uploaded online on the course page and made available to students

LESSONS

Please be on time, so to not disturb the lesson

Please attend the lessons as much as possible: you will receive more details than the ones in the notes, you can make questions, and it will be more easy to understand the new concepts

STUDENTS RECEPTION

It will be carried out on Monday afternoon 15.30-17.30, Vicenza site, office 5, III floor,
from September the 30th, 2019 for the entire course period.

Please let me know in advance: either by email or after the lessons
For the following period the meetings will be planned by email

Reference books
Author Title Publisher Year ISBN Note
Laurent L. Jacque International Corporate Finance, + Website: Value Creation with Currency Derivatives in Global Capital Markets (Wiley Finance) (Edizione 1) Wiley 2014
Jeff Madura International Financial Management (Edizione 12) Cengage Learning 2013 978-1-133-94783-7
Geert J Bekaert, Robert J. Hodrick International Financial Management (Prentice Hall Series in Finance) (Edizione 2) Prentice Hall 2011

Assessment methods and criteria

The exam consists of a written test, lasting two hours. It will be compounded of practical exercises and theoretical questions concerning the whole program. In the event of doubt regarding the assessment, the student will be called for a compulsory oral test