MASTER IN FINANCE (MA) · like options and futures and their use in investment and hedging strategies. In particular, we will discuss the binomial model and the Black-Scholes model

MASTER IN FINANCE (MA)

SPECIALIZATIONS IN:

Financial Management

Risk Management

RECRUITING CYCLE 2017/2018

About

This course focuses on how economic events and transactions are communicated through the

financial reporting process to users of financial reports.

Learning objectives

Upon completion of this course, you will be able to understand:

The fundamental concepts that support financial reporting systems, used both in the

United States and internationally;

The role of judgements and estimates in the preparation and interpretation of financial

reports;

How to read, analyze and interpret financial reports;

The meaning of assets and liabilities, revenue and expenses, working capital, cash flow

statements and long term liabilities

Key concepts

In order to achieve the goals of this course, you must master the following key concepts:

Financial reporting systems (IFRS and GAAP);

Principal financial statements;

Analysis of inventories;

Analysis of off-balance sheet assets and liabilities;

Analysis of inter-corporate investments;

Analysis of business combinations

FINANCIAL ACCOUNTING AND ANALYSIS

About

The course “Statistics and Empirical Methods” is about statistics and how it helps to make well-

grounded decisions. We start with descriptive statistics as the basics and then turn to

probability distributions that allow us to discuss the concepts of hypothesis testing and

estimation. The course has an applied character and tries to visualize every concept with

applications and exercises. The course should enhance the managerial skills of the

participants in the way that it allows them to analyze relevant data sets in order to understand

the underlying economics and finally reach the right decisions.

Learning Objectives

Upon completion of this course, you will be able to:

Analyze information effectively;

Make better informed decision;

Apply statistical tests to evaluate managerial decisions

Key Concepts


Probability;

Probability distribution and descriptive statistics;

Sampling and estimation;

Hypothesis testing;

Correlation analysis and regression;

Time series analysis;

Simulation analysis

STATISTICS AND EMPIRICAL METHODS

ECONOMICS

About

Economics is about the complex global economic environment in which managers and firms

operate. This environment is shaped, on the one hand, by the general forces of demand and

supply and the level of aggregate economic activity; and on the other, by the responses of

policy makers and regulators to economic developments. We will examine the behavior of

aggregate output, exports and imports, exchange rates and interest rates, consumption and

investment, inflation and unemployment, and how these are influenced by monetary and fiscal

policies, and by changes in the regulatory framework. The goal is to enable a manager to

choose a course of action consistent with attaining important objectives, subject to the

constraints imposed by the complex global economic environment.

Key Concepts

Upon completion of this course, you will have the ability to understand the basic implications

of the following key concepts:

Economics;

Market Forces of Supply and Demand;

Business cycles and demand management;

Fiscal policy, fiscal stimulus;

Monetary policy and interest rates;

Causes of and remedies for inflation and unemployment;

Growth performance of nations across the world;

Convergence of living standards or lack thereof;

Financial markets and expectations;

Effects of government regulation;

Exchange rates, imbalances, and capital flows;

Effects of fiscal and monetary policies in open economies

About

The course covers the following topics: term structure of interest rates, bond pricing, duration

and convexity, credit risk, liquidity risk, portfolio theory, equilibrium in capital markets, equity

valuation, hedging, behavioral vs. neoclassical finance.

Learning objectives


Handle non-flat term structures;

Use (simple) pricing models for equity and debt;

Understand the impact of liquidity and default risk;

Set up hedging strategies for market risk;

Understand examples of structured products

Key concepts


Technical analysis;

Fixed Income valuation and return analysis;

Term structure determination and yield spreads;

Analysis of credit risk;

Fixed-income portfolio management strategies;

Execution of portfolio decisions (trading)

CAPITAL MARKETS AND ASSET PRICING

About

Based on the substance of the introductory finance course in the first semester, this course

provides an introduction to corporate finance with a strong decision making orientation. The

course is focused on fundamental questions such as those of how to understand and solve

capital budgeting, valuation and financing problems of corporations. Course participants will

be in the role of an assistant to a financial manager or a board member and are expected to

offer advice and guidance for the person with whom they work and who often has to make

important decisions on short notice.

Learning Objectives

Upon completion of this course, you will be able to argue in a simple and constructive way:

What the relevant objectives are in the case of financial decision making;

What the most suitable method of assessing investment projects are;

How to determine the cost of capital for investment decisions, both conceptually and

practically;

How to determine the value of a firm as a going concern;

What relevant and irrelevant financing decisions a listed corporation faces

under which conditions, and why, capital structure and dividend decisions are relevant

for listed corporations;

How to conceive of risk and how to take risk into account in making financial decisions;

What the essential issues are in the context of corporate governance

Key Concepts


Shareholder Value and the objectives of financial decision making;

Net present value and Internal Rate of Return and the applicability of these two main

methods for making investment decisions;

Cost of capital, especially cost of equity and how it can be determined;

Capital structure and its (limited) relevance;

Dividend decision and the cost of internal financing;

Diversification and the relevance of diversification for listed firms;

The Capital Asset Pricing Model and its application to investment decisions;

Agency relations in finance and their role for financial decision making;

Corporate governance and its meaning in different financial and legal systems;

Bankruptcy and insolvency laws

CORPORATE FINANCE

About

The course focuses on, but is not restricted to the use of results controls and how they should

be embedded in a comprehensive management control system. Results controls usually

involve measurement and evaluation of mainly financial performance measures derived from

accounting data by ratio and financial analysis. Financial performance measures are

prevalent for several reasons. For example, they are provided timely, precisely, reliably and

in an objective fashion. They are congruent with the organizational goal of profit maximization

and can be tailored to the control problems on each hierarchy level in an understandable

fashion. Additionally, the accounting model of a firm’s transactions, which is mainly underlying

financial performance evaluation, is to a large extent causally related to the business’s

economic success, so that accounting information supports results controls. The

predominance of accounting information as control mechanism is reflected in management’s

bonus contracts, which usually include at least one accounting-based measure, e.g., residual

income or return on investment.

Learning objectives


Distinguish causes of management control problems;

Design and evaluate an appropriate and comprehensive management control system,

e.g., regarding choice of controls, control system tightness, or control system costs;

Identify financial responsibility centers as the underlying organizational structure for

using accounting-based results controls;

Analyze financial performance and implement typical instruments in the context of

financial control, e.g. planning, budgeting, or transfer-pricing;

Effectively choose appropriate financial measures for performance evaluation (e.g.,

ROCE, EVA) either in an isolated fashion or in combination with non-financial

indicators (e.g., Balanced Scorecard);

Understand the controllability problem and the need to control for uncontrollable

factors within the presentation of performance results

Key concepts


Ratio and financial analysis;

Performance evaluation;

Presentation of performance results;

Application of the management control package

MANAGEMENT CONTROL SYSTEMS

About

The main aim of the course is to provide a thorough understanding of the private equity

approach and the hedge fund industry. Both industries have experienced very significant

growth rates in the recent past and play a prominent and still growing role in financial markets

but also in the funding of companies as well as their operations. The underlying philosophy of

the module is to carve out the special features and mechanisms of these key players in the

financial markets by comparing them to other investors and to the conventional corporate

finance approach.

Learning objectives


Understand the main structure of private equity and hedge funds;

Better understand the private equity cycle (consisting of selecting, financing, norturing

firms and finally exiting);

Capture the particular approach of private equity firms as active investors;

Understand the different types of hedge funds;

Investigate the different strategies of hedge fund and their average performance;

Discuss the „locust“ accusation

Key concepts


Venture Capital and Leveraged Buy-Out;

Public versus private equity;

Closed-end funds;

Private Equity Cycle;

Hedge Fund Strategies;

Role of leverage;

Initial Public Offerings and Trade Sales

ALTERNATIVE INVESTMENTS

About

Derivatives and Financial Engineering is concerned with the valuation of derivative securities

like options and futures and their use in investment and hedging strategies. In particular, we

will discuss the binomial model and the Black-Scholes model for option valuation. The students

will acquire practical experience with models via the use of spreadsheets.

Learning objectives


Apply the principle of replication to price derivatives and structures products;

Value simple derivatives in binomial models;

Set up hedge positions with derivatives to manage risks;

Design simple arbitrage trades based on derivatives mispricing;

Use derivatives to structure cash flows in an optimal fashion

Key concepts


Option valuation in the binomial model;

Black-Scholes model;

Hedging and greeks;

Exotic options;

Implied volatility

DERIVATIVES AND FINANCIAL ENGINEERING

About

Enterprise risk management is a core competency of all firms, independent of the industry they

operate in. Recent events such as major compliance breaches demonstrated that risk culture

and risk governance is still not fully developed at many firms. Thus, this course is focused on

the qualitative elements of enterprise risk management, involving extensive group work and

up-to-date case studies.

Learning objectives

Upon completion of the course, you will be able to understand the following concepts and their

application in practice:

Governance of enterprise risk management (Three lines of defence model, role of the

CRO/CFO, roles of risk committees, link to compliance, internal audit and other

functions);

Risk strategy and appetite (Business and risk strategy, limitation of risks);

Risk management processes (identification, assessment, reporting, mitigation)

Key concepts


Three lines of defence concept;

Principles of Enterprise Risk Management

ENTERPRISE RISK MANAGEMENT

About

The course gives an overview of the central topics in the field of investment and asset-

management. In addition to the presented academic theories, concepts and analytical

techniques the students are asked to practical apply the pictured concepts.

Learning objectives


Model liabilities of (DB/DC) pension plans within an investment framework;

Know the objectives of major institutional investors (insurance companies, pension

funds, mutual funds);

Know the concepts of strategic, tactical, and dynamic asset allocation;

Model return-/risk profiles of stock, bond, and real estate portfolios over short and long-

term investment horizons (time diversification);

Specify the optimal strategic asset allocation under shortfall-risk constraints;

Construct dynamic asset allocation with downside risk constraints (CPPI);

Know the risk-return profiles of alternative investments (e.g. real estate);

How to manage foreign exchange risk for international investment

Key concepts


Management of Individual / Family Investor Portfolios;

Management of Institutional Investor Portfolios;

Equity Portfolio Management Strategies;

Analysis of Long-Lived Assets;

Analysis of Pensions, Stock Compensation, and Other Employee Benefits;

Analysis of Global Operations;

Types of Alternate Investments and their Characteristic;

Real Estate;

Tangible Assets with Low Liquidity;

Portfolio Concepts;

Pension Plans and Employee Benefit Funds;

Other Institutional Investors;

Mutual Funds, Pooled Funds, and ETFs;

Economic Analysis and Setting Capital Market Expectations;

Asset Allocation (including Currency Overlay);

Portfolio Construction and Revision

GLOBAL ASSET ALLOCATION

About

This course is based on the belief that analytical methods are best understood by implementing

them. It does not only introduce students to the major concepts and instruments for the

management of credit risk in both capital markets and banking institutions theoretically but also

shows how to implement them employing Excel. Although not always the first choice for some

problems, it is the major application used in financial institutions and accessible from almost

everywhere. Nonetheless, students are not required to have an excessive prior knowledge in

Excel! All applications will be demonstrated and described in class. Furthermore, it will be

shown that other statistical packages (e.g. Stata) will provide helpful for an analysis of markets

related to credit risk.

Students will become familiar with the products and models used in today’s credit markets

such as internal and external ratings, credit default swaps (CDS) and collateralized debt

obligations (CDO’s), structural asset value models, and also some concepts of the Basel

capital accord. The application of these products and models will be discussed as well as

pricing issues for credit risk trading. Additionally the interrelations of credit risk factors in

security markets will be analyzed empirically.

Learning objectives

Upon completion of the course, you will be able to:

Perform simple regression analyses, also using forecasting methods;

Evaluate single claim credit risk applying different methodologies such as structural

models, ratings, or scoring models;

Estimate the risk of a credit portfolio using default-mode models;

Understand and estimate the price of credit risk;

Understand structured portfolio credit risk and be aware of the implied risks

Key concepts


Scoring Models;

Structural Pricing Models;

Ratings and Rating Transition Matrices;

Prediction of Default Probabilities;

Portfolio Risk (e.g. Value-at-Risk, Expected Shortfall);

Credit Default Swaps (CDS);

Collateralized Debt Obligations (CDO);

Regulation

APPLIED CREDIT RISK MANAGEMENT

About

“Ethics in Finance” will address the professional intersection where financial theory meets

practice and where the concept of ethical behavior crosses from the abstract to the concrete.

High ethical principles and professional standards are essential to positive outcomes; rules

and regulations, while necessary, are not sufficient by themselves.

In addition to exploring the theories of rational ethics and current best practice, the class

features a series of real-life examples of ethical issues, in addition to general cases involving

dilemmas that investment professionals may typically encounter. Participants will apply their

knowledge of ethical principles to develop solutions to resolve these dilemmas. Group

discussion provides an opportunity to share insights, and develop a deeper understanding and

appreciation of ethical principles and more importantly, individual ethical behavior.

Course Objectives

Upon completion of this course, you will:

Know of the main moral tension fields and ethical approaches related to finance;

Heighten your awareness of ethical issues and commitment to norms and values in the

area of finance (recognize conflicts of interest, understand fiduciary duty);

Increase your skills, knowledge and attitudes that will enable you to resolve ethical

situations or problems in an appropriate manner;

Understand how to apply CFA Institute’s Code of Ethics and Professional Standards of

Practice;

Gain an informed sense that ethical behavior is in an organization’s as well as your

own best interest

Key Concepts


Most common classical and modern ethical theories;

Practical application of ethical decision-making framework;

Behavioral and situational impacts affecting ethical decision-making;

Application of CFA Institute’s Standards of Professional Conduct;

Conflicts of Interest, Fiduciary Duty, Limitations of Regulation

ETHICS IN FINANCE

About

The course focuses on Mergers & Acquisitions (M&A) in modern financial markets. Combining

relevant theories and real-life cases, the students will learn the fundamentals of M&A

transactions, including their economic background, strategies, planning and conduction, value

implications and related further issues. The course starts with a general overview of corporate

governance structures and markets for corporate control. Based on this knowledge, students

will learn the approach to and the structuring of a full-fledged M&A deal. The strategy of the

deal, as well as the deal process, payments and selected aspects post-merger integrations will

be explained. A vital part of this process is the pricing of the deal. Company valuation will

therefore be an important part of the course.

Special cases of M&A deals, such as Hostile Takeovers will be explained subsequently. At the

end of the course, the students should be able to understand the economics of modern-day

corporate M&A transactions.

Learning objectives

Upon completion of the course, you will be able to understand:

Why companies engage in M&A transactions;

The characteristics of different kinds of M&A deals: mergers, acquisitions, spin-offs,

divestitures, carve-outs etc.;

How M&A processes are structured;

The fundamentals of company valuation;

How hostile takeovers work and how companies can defend against them

Key concepts


The Market for Corporate Control;

Due Diligence;

Company Valuation (DCF, Comps, LBO);

Hostile Takeovers and Defense Mechanisms;

Deal Financing, especially LBO structures;

Spin-Offs, Carve-Outs, Joint Ventures and Divestitures

MERGERS AND ACQUISITIONS

About

This course studies key concepts and issues in bank management. As a motivation, it

highlights current challenges by analyzing the subprime financial crisis (including a detailed

case study on the near failure and rescue of HRE) and the ensuing tightening in bank

regulation. A general framework for bank valuation then provides the background against

which value-based bank management is discussed. Topics covered include the drivers of bank

value and a detailed examination of deposit and loan pricing. The course concludes with an

introduction to risk management in banking.

Learning objectives


Understand the peculiarities of valuing a bank, factors shaping the banking industry

(e.g., regulation), and how this bears on value-based bank management;

Apply key concepts of value-based bank management like deposit and loan pricing;

Understand key concepts of risk management in banking

Key concepts


Bank Regulation;

Fundamental bank valuation model;

Bank value drivers;

Deposit pricing;

Loan pricing;

Bank risk management

BANK MANAGEMENT

About

The course proceeds from the current state of retail financial services in Europe and the key

technological trends that hold the promise of massively changing the industry. The course will

extrapolate these trends to arrive at possible future scenarios for the industry in which smart

data, machine learning, comprehensive individual risk management and macro markets will

play a decisive role. The course will also elaborate on how established industry players should

adapt their current business models and possibly cooperate with new players in order to thrive

in these future scenarios. The perspective will be mainly from the angle of retail clients and

their behavioral patterns. This will allow to use insights from behavioral finance and discuss

the social value of finance in a digital world. The teaching format will be a blend of lectures,

case studies, expert guest speeches and brief student presentations. The literature for the

course comprises of recent research papers, industry studies and books from neighboring

fields such as behavioral finance, computer science, banking and idea generation and

verification.

Learning objectives

Upon completion of the course, you will understand:

How digitalization will affect the different aspects of retail financial services;

How to apply (behavioral) finance in assessing FinTech business models;

How to analyze customer behavior for causal effects;

Today’s and tomorrow’s role of financial advice and of human advisors;

The role of technology ecosystems for promoting and implementing innovation

Key concepts


Investor and borrower decision making;

Randomized controlled trials;

Emerging technologies such as distributed ledgers and artificial intelligence;

Goal driven investment and savings and digital wealth management;

Innovation canvases

FINTECH IN RETAIL FINANCIAL SERVICES

About

The course highlights macroeconomic challenges for the financial industry like globalization,

global/environmental risks, population dynamics and the 4th industrial revolution (cyber-

physical systems).

Learning Objectives

Upon completion of this course, you will be able to understand:

Philosophical quotes, definition of risk, typical risk types for the financial industry,

frequency and belief type probabilities, the role of long options within the decision

making process;

The influence of risk behavior/awareness and motivation;

The difficulties of risk communication;

Systematization technics and the limitations of risk modeling;

How to analyze the success of a corporate and the challenges of corporate

restructuring;

The special requirements and characteristics of financial institutions;

The nature of financial crisis;

The essentials of good and modern bank regulation, supervision and risk governance;

The goals and the concept of the European Banking Union;

The tools for micro- vs. macro-prudential Risk Management;

The meaning and consequences of “globalization”;

The major environmental global challenges of this century;

How to analyze complex problems;

Positive and negative effects of the 4th industrial revolution;

Reasons for people to get connected and other industry trends;

How to organize good risk management and governance in financial institutions;

The challenges of compliance risk management;

That management decisions need to be compliant and have to fulfill the Business

Judgment Rule;

Weaknesses in risk assessment and management evaluation;

How to prepare and manage the communication process for crucial and risky decisions

Key concepts


Decision making theory;

Corporate valuation;

Bank regulation and supervision,

Risk governance: modelling vs. expert knowledge, weaknesses in risk assessment and

in management evaluation;

The elements of the Business Judgment Rule;

Instruments and parameters to regulate and supervise banks;

Requirements for the target oriented communication between management and

governance in financial institutions

BANK RISK GOVERNANCE AND REGULATION

About

The course introduces students to the conceptual framework in which financial decision

making of international firms takes place. Students will learn to assess the riskiness of a

currency from a firm’s perspective and how to manage this exposure. In addition to the

theoretical underpinnings of international finance we will cover the practical side of

international financial decision making - the investment and funding problem. Thus, typical

problems of global funding and international investment strategies as well as capital budgeting

and capital structure issues will be analyzed from an international perspective. The course

provides a sound understanding of international financial markets and institutions and aims

particularly on international financial management.

Learning objectives

Upon completion of the course, you will be able to understand:

How international financial markets function;

What drives currency prices;

How international debt markets operate;

How to deal with international (financial) risk exposure;

How to evaluate international projects

Key concepts


Main elements of foreign exchange markets;

Main drivers of currency prices (spot and future);

International debt markets;

International equity markets;

International corporate finance and capital budgeting decisions;

International costs of capital;

Interest rate and foreign currency swaps

INTERNATIONAL FINANCE

About

Financial stability can be defined as a condition in which the financial system is capable of

withstanding shocks and the unraveling of financial imbalances. Safeguarding financial stability

requires identifying the main sources of inefficiencies in the allocation of financial resources

and the mismanagement of financial risks. The aim of this course is to provide an overview of

recent theories and empirical findings that constitute the prerequisites to understanding,

monitoring, and safeguarding financial stability. The course features a comprehensive

treatment of systemic risk in banking, with a special focus on the 2007-08 global financial crisis.

We will study the anatomy of modern banking systems and the contagious spread of

vulnerabilities in such systems. Moreover, we will study several channels through which

systemic banking crises propagate across countries. The course puts large weight on lessons

for financial stability policy. In particular, we will review unconventional monetary policy

measures and macro-prudential regulatory frameworks aimed at maintaining financial stability.

Learning objectives


Understand the main mechanisms behind financial stability and instability;

Better understand the underlying structures of the global financial system;

Capture the implications of regulatory reform on the banks and the financial systems;

Link the regulatory reform to key operations such as risk management;

Understand the role of key institutions such as rating agencies and central

counterparties;

Capture the main functions of regulating and supervising bodies

Key concepts


Systemic risk in banking;

Interconnectedness and contagion;

Banking crisis resolution;

Banking sector globalization and financial crisis transmission;

Unconventional monetary policy;

Macroprudential regulation and supervision

FINANCIAL STABILITY AND REGULATION

About

The course “Household Finance” is concerned with studying household investment and

financing decisions. The course starts by briefly discussing how households should optimally

invest, thereby refreshing concepts already known from portfolio theory. We will then confront

these normative insights with the empirical reality and explore how households invest based

on current research papers. The result is going to be that households make mistakes and

deviate from normative recommendations. A natural next step is to test hypotheses why

households make mistakes and discuss research geared towards finding potential remedies

of these investment mistakes. These remedies may stem from changing bank’s businesses,

regulation or information provision.

Learning objectives


Contrast the theoretic recommendations on how household should invest with actual

household behaviour;

Discuss potential reasons for investment mistakes;

Know which investment mistakes are most detrimental to investors;

Assess the impact of regulatory actions as well as financial advice;

Asses the causal impact of innovations on household behavior

Key concepts


Portfolio Management & Optimization;

Behavioral Finance;

Portfolio Performance Measurement;

Understanding the insights from econometric analyses;

Basics of Bank Management

HOUSEHOLD FINANCE

About

Risk management is a core competency of all firms. Non-financial risks (operational risk,

reputational risk and strategic risk) are of growing importance across industry sectors. Recent

events demonstrated that risk culture and risk governance is still not fully developed at many

firms. Thus, while presenting some techniques for quantifying non-financial risks, this course

is more focused on the qualitative elements of risk management.

Learning objectives

Upon completion of the course, you will be able to understand the following concepts and their

application in practice:

Governance of risk management for non-financial risks (Three lines of defence model,

role of the CRO/CFO, roles of risk committees, link to compliance, internal audit and

other functions);

Risk strategy and appetite (Business and risk strategy, limitation of risks) and recent

examples of non-financial risks;

Risk management processes (identification, assessment, reporting, mitigation) for

Operational Risk;

Reputational Risk;

Strategic Risk

Key concepts


Three lines of defense concept;

Methods for Risk identification and asses for Non-Financial Risks;

Economic capital models for Non-Financial Risks;

Mitigation strategies for operational risk, reputational risk and strategic risk

MANAGEMENT OF NON-FINANCIAL RISK

About

This course builds on case studies in order to study the fundamentals of corporate financial

risk management in diverse situations. It covers techniques to identify, measure and manage

corporate financial risk, both for financial and non-financial institutions, as modern financial

markets and regulation require. Specifically, topics of discussion will include dynamic hedging

and portfolio replication, popular risk measures such as Value-at-Risk and Expected Shortfall,

Earnings at Risk and Cash flow at Risk, the failures of such risk measures under special

circumstances, as well as the active risk management of exchange rate, interest rate, and

credit risk.

We analyze the pros and cons of using different derivative securities, from standard futures

and options, to the more advanced credit default swaps (CDS) and collateralized debt

obligations (CDOs). The nature of the course is both quantitative and application driven. A

thorough and up-to-date knowledge of risk management principles and tools is essential in

today’s markets since the decisions of risk management professionals, such as treasurers, risk

analysts, risk controllers and portfolio managers may determine the fate of a whole institution.

Learning objectives

Upon completion of this course, you will:

Learn to apply modern risk modeling techniques in order to analyze and optimize the

risk position of a corporation;

Know how to apply hedging strategies using derivative instruments such as futures and

options will be considered;

Work with real world data and case studies

Key concepts


Market risk;

Credit risk;

Interest rate risk;

Exchange rate risk;

Hedging with Futures & Options;

Financial Engineering;

Structured Finance

RISK MANAGEMENT

Documents

MASTER IN FINANCE (MA) · like options and futures and their use in investment and hedging strategies. In particular, we will discuss the binomial model and the Black-Scholes model