Registry
Module Specifications
Current Academic Year 2012 - 2013
Please note that this information is subject to change.
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| Description | |||||||||||||||||||||||||||||||||||||
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The module is designed to introduce students to financial management, with special emphasis on financial decision making in public sector firms. To do so, it will familiarize students with a number of securities, especially stocks, bonds and basic types of derivatives contracts, mainly futures and options, discuss decision making under uncertainty, illustrate the concepts of time-value of money and the trade-off between risk and return, explore modern techniques of valuation and illustrate applications to performance attribution and the optimization of financing and investment decisions, with special emphasis on cost-benefit analysis in public sector firms. This module will be delivered through a mix of formal lectures and students will be expected to contribute to class discussions and to engage in group projects. | |||||||||||||||||||||||||||||||||||||
| Learning Outcomes | |||||||||||||||||||||||||||||||||||||
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1. Identify the assumptions and predictions of the main paradigms in modern financial theory 2. Illustrate how modern portfolio theory can be used to form optimized portfolios of stocks and other securities 3. Apply the Capital Asset Pricing Model to estimate the cost of capital and solve valuation, investment appraisal and cost/benefit analysis problems 4. Identify the implications for financial management of alternative views on market efficiency advocated by the extant literature 5. Debate the implications for financial decision making of alternative assumptions about the objectives of the firms, discriminating between private sector and public sector firms 6. Solve risk management problems involving portfolios of securities, such as stocks and currencies, as wells as commodities and simple derivatives contracts, especially futures and options | |||||||||||||||||||||||||||||||||||||
All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml |
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| Indicative Content and Learning Activities | |||||||||||||||||||||||||||||||||||||
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Basic financial definitions and notions. Returns and rates of return, compounding regimes, annuities and perpetuities,private vs.social returns. Elements of theory of decision making under uncertainty. Time value of money, the expected utility framework (introduction) and intuitive illustration of the concept of risk aversion. Overview of the theory of efficient markets and comparison with alternative perspectives. The rational valuation formula, the Efficient Market Hypothesis and the neo-classical perspective, implications for market dymamics and investment management, the behavioral finance perspective. The risk-return tradeoff I. Revision of basic statistical concepts and notions (returns as random variables, average returns, standard errors of the mean), overview of stylized facts about risk and return of the main asset classes. The risk-return tradeoff II. Introduction to Markowitzs Mean-Variance portfolio theory and the Capital Asset Pricing Model with applications to the determination of the cost of capital and to investment appraisal. Cost/benefit analysis. The objectives of firms in the public and in the private sector, cost/benefit analysis vs. NPV analysis. Risk management. Discussion of risks faced by publis and private sector firms, introduction to financial derivatives and their use to solve risk management problems. | |||||||||||||||||||||||||||||||||||||
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| Other Resources | |||||||||||||||||||||||||||||||||||||
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