Introduction to Finance and Methods of Quantitative Analysis

Riccardo Trezzi

Diego Cerdeiro

The year 2011 witnessed several events of significant importance in the global finance, including the US being on the verge of default, and the prolonged Eurozone crisis. Have you ever wondered why finance has become intricately involved with our lives? Do you want to know what financiers do, and how they have come to have massive impact on the world economy? If your answer is ‘yes’, this course might be just right for you!

During these four weeks, you will learn this vibrant discipline by following an ‘investment route’ – which addresses the interaction between investors and financial markets. We will examine financial concepts, as well as the language and mathematical tools that facilitate the analysis in economics and finance. Lectures will be accompanied by practical Excel sessions where you will gain hands-on experience in financial modelling. By the end of the course, you will have been familiarised with the subject to the extent that you appreciate the importance of finance in the modern world (and for those who wish to proceed to ‘Advanced Empirical Finance’, to the extent that you would be able to do so comfortably).

This course is aimed at:This is an introductory course in financial economics: No previous knowledge of economics or finance is assumed. Nevertheless, you will fully benefit from this course if you are numerate and Microsoft-Excel literate (you do not have to be an expert user; only need to be aware of the very basic operations like entering and editing data).

Pre-requisite: No previous knowledge of economics, finance or mathematics is required, but would be an advantage.

Transferable knowledge and skills: Students will learn how to apply financial theory to real situations facing the modern world of finance.

Core readings:

• Gujarati and Porter (2009), Essentials of Econometrics, McGraw-Hill
• Hull (2006), Fundamentals of Futures and Options Markets, Pearson
• Mishkin & Eakins (2009), Financial Markets and Institutions, Pearson

Supplementary Readings

• Copeland, Weston & Shastri (2005), Financial Theory and Corporate Policy, Pearson
• Elton, Gruber, Brown & Goetzmann (2007), Modern Portfolio Theory and Investment Analysis, Wiley
• Hull (2006), Options, Futures, and Other Derivatives, Pearson
• Hull (2006), Risk Management and Financial Institutions, Pearson

Assessment:

• 1 Final Exam: 45%
• 1 Final Essay: 45%
• Participation, progress and attendance: 10%

Lecture: 12 x 1 hour 15 minutes (total 15 hrs)

Seminar: 8 x 1 hour 15 minutes (total 10 hrs)