Courses

F262

Financial Markets

  • 15-weeks
  • 3 credits
  • Prerequisite: A200, K201, and F260

This course provides an overview of financial markets, including stock markets, bond markets, derivative markets, and active management markets. Specifically, it examines portfolio diversification, risk and return, mutual fund performance, market efficiency, bonds, options, and futures. No credit for juniors and seniors in the Kelley School.

The course has three additional goals for each student to develop:

  1. Applied spreadsheet skills for financial modeling. Spreadsheets are the primary instrument used in  most real-world finance positions, such as financial analysts, credit analysts, security analysts, etc. The course has two spreadsheet-based individual projects and two spreadsheet-based team projects.
  2. Slide show presentation skills. Electronic slide show presentations are a central communication skill in business. The course contains one in-class slide show presentation.
  3. Small group communication skills. Developing skill and confidence in group work is crucial. This course involves two team projects to give you additional experience with group processes.

UNIT 1: STOCK MARKETS

  • Syllabus and Introduction
  • Background and Issues
  • Asset Classes and Financial Instruments
  • Securities Markets
  • Mutual Funds and Other Investment Companies
  • Risk and return
  • Asset allocation
  • Lifetime Financial Planning Project Explained
  • Diversification
  • Portfolio Optimization Project explained
  • Optimal CAL and Efficient Frontier
  • Systematic vs. Idiosyncratic Risk
  • Computer demo: Portfolio Optimization
  • Introducing the CAPM
  • CAPM Assumptions
  • Portfolio Optimization Project is due
  • Using CAPM
  • Security Alphas
  • CAPM Empirical Evidence
  • Efficient Markets
  • Lifetime Financial Planning Project is due
  • Lifetime Financial Planning Project Presentation
  • Behavioral Finance and Technical Analysis
  • Unit Review

UNIT 2: BOND MARKETS

  • Bond Formulas in Excel
  • Yield to Maturity
  • Understanding WSJ Bond Tables 
  • Corporate Bond Yields and Ratings
  • Junk bonds
  • Yield Curve
  • Computer demo: Term structure dynamics
  • Interest Rate Risk by Coupon Rate & Maturity
  • Duration and Interest Rate Risk
  • Passive Bond Management
  • Unit Review

UNIT 3: DERIVATIVE MARKETS

  • Introduction to Derivatives
  • Payoff and Profit Diagrams
  • No Arbitrage Framework
  • Binomial Option Pricing Model
  • Put-Call Parity
  • Black-Scholes Formula
  • Cumulative Normal and Numerical Examples
  • Black-Scholes Option Pricing Project Explained
  • Global Cost of Capital Project Explained
  • Interest Rate Swaps
  • Foreign Exchange Swaps
  • Futures Basics
  • Futures vs. Forwards
  • Black-Scholes Option Pricing Project is due
  • Spot-Futures Parity
  • Hedging and Speculating with Futures
  • Unit Review

UNIT 4: ACTIVE MANAGEMENT MARKETS

  • Globalization and International Investing
  • Hedge Funds
  • Investors and the Investment Process
  • Unit Review
  • Global Cost of Capital Project is due
  • Global Cost of Capital Project Presentations