Course Details

Course Information Package

Course Unit CodeAFIN306
Course Unit Details
Number of ECTS credits allocated5
Learning Outcomes of the course unitBy the end of the course, the students should be able to:
  1. Describe of the investment environment, markets and institutions
  2. Apply portfolio theory analysis using expected returns, risk and explain the concept of diversification
  3. Calculate the value of stocks using alternative models based on dividend and future free cash flows and use traditional models of optimal capital structure.
  4. Explain and apply the theory of market efficiency in different settings
  5. Describe other types of financial instruments like forwards, futures and swaps and their role in hedging risk
  6. Explain the characteristics of fixed-income securities and the impact of different forms of uncertainty affecting fixed-income securities
Mode of DeliveryFace-to-face
Recommended optional program componentsNONE
Course Contents

An overview of financial markets: The investment environment and distinction between real and financial assets, the players of the financial system (households, business and government sector) and their role, the money market, the bond and derivative market structure and their role, the security trading process, mutual funds and other investment companies

Portfolio theory: Means, variances and correlations of assets, feasible investment set, minimum variance set and efficient set, investor preferences in mean-variance space and the concept of diversification, portfolio optimization and optimal capital allocation

Stock Valuation and market efficiency: dividend discount model, Discounted free cash flow approach and CAPM, implications of market efficiency under its different forms

Derivatives and their use: the characteristics of derivative securities, different types of derivative securities and their use,risk management use of derivative securities

Fixed income securities: List of bond characteristics, different types of government and corporate bonds, option provisions embedded in bond contracts, present value formulas for bond pricing, the term-structure of interest rates and interest uncertainty, managing bond portfolios based on duration and immunization
Recommended and/or required reading:
  • Bodie Z., Kane A. and Alan Marcus Investments, 6th Edition, McGraw-Hill, 2004
  • Brealey, R., Myers, S., and A. Marcus, Principles of Corporate Finance, McGraw Hill, 2010
  • J. Hull Options, Futures and Other Derivatives, Pearson-Prentice Hall, 2006
  • Copeland, T., F. Weston , K. Shastri Financial Theory and Corporate Policy, Addison-Wesley, 2004
Planned learning activities and teaching methodsThe taught part course is delivered to the students by means of lecturers, conducted with the help of computer presentations and the use of the board. Lecture notes and other course material like spreadsheet examples are available to students through the web.
Assessment methods and criteria
Final Exam60%
Language of instructionEnglish
Work placement(s)NO

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