• Number of ECTS: 3
• Course number: MScFE-35
• Module(s): Module 1.D.Mathematics and Data Analysis I
• Language: EN
• Mandatory: Yes

The aim of this part of the lecture is twofold:  briefly review some mathematics, which the students already learned before, such as static optimization theory, differential equations and so on. Then we introduce some more advanced mathematics methods, which are needed to pursue financial and economic analysis at a more advanced level , such as dynamic and stochastic optimization.

(1) Can work out first order linear and  nonlinear differential equations. (2) Do first and second order conditions of optimal problem with and without constraints. (3) Using Maximum principle and dynamic programming study dynamic optimization (4)  Obtain some basic idea of Stochastic calculus and optimization.

Written exam (2 hours)

Literature: L. Blume and C. Simon. Mathematics for Economists. Chiang, A.  and  K. Wainwright. Fundamental Methods of Mathematical Economics. Chiang, A.  Elements of dynamic optimization. Kamien M and N. Schwartz. Dynamic optimization: The calculus of variations and optimal control in Economics and Management.  

• Number of ECTS: 2
• Course number: MScFE-36
• Module(s): Module 1.D.Mathematics and Data Analysis I
• Language: EN
• Mandatory: Yes

Understand the difference between a parameter of a model in the population and an estimator of the parameter based on the data. Describe the dependence among random variables using properties of the multivariate distributions and of the conditional and unconditional expectations of the random variables. Build predictors of variables given the values taken by other random variables. Test whether features of samples differ statistically across different samples.

Random variables. Continuous and discrete random variables and their distributions. Expectations of random variables. Independence of random variables. Unconditional and conditional distributions, their properties. Multivariate distributions. Conditional expectation as predictor. Multivariate normal random vectors and their properties. Hypothesis testing and confidence intervals. 

Task 1 Written exam(midterm) Grading Scheme: 0-40 Weight for final Grade: 40% Task 2 Written exam(final exam) Grading Scheme: 0-50 Weight for final Grade: 50% Task 3 Take-home exam Grading Scheme: 0-10 Weight for final Grade: 10%

Literature Recommended reading: Probability and Statistics, by Morris DeGroot and Mark Schervish, Pearson New International Edition, 4th edition (2012); Introductory Econometrics: A Modern Approach, by Jeffrey Wooldridge, CENGAGE Learning Custom Publishing, 7th edition (2018), Appendices A, B, C

• Number of ECTS: 5
• Course number: MScFE-37
• Module(s): Module 1.D.Mathematics and Data Analysis I
• Language: EN
• Mandatory: No

Acquire the statistical foundations required to perform statistical analysis in business settings. Very often one needs an accurate and informative analysis of a sample of data. For example, the data might be financial returns, employee salaries, or advertising; Use descriptive statistics to summarise a set of data; Apply methods of statistical inference to try to draw generalisations from the sample for the broader population; Recognize the existence of sampling uncertainty before accepting or rejecting a research hypothesis; Undertake ‘multivariate’ analysis; Distinguish the relationships between several variables.

Prerequisites:Previous knowledge of statistical analysis is not a prerequisite. Although many participants will previously have studied statistics, the course will aim to accommodate those who have only had minimal exposure to the subject. Furthermore, previous experience with statistical software is not necessary. General digital literacy is however required.Econometrics course using the software R for students interested in the finance tracks in the second year.Use of R (basic datafile manipulation, descriptive statistics, test theory)Simple OLS regression analysis Multiple OLS regression analysisAsymptotic propertiesUnivariate time series modelling and forecasting

Written exam (2 hours)

Literature: Introductory Econometrics for Finance by Chris Brooks Introductory Econometrics: A Modern Approach by Jeffrey M. Wooldridge Statistics: An introduction using R by Michael J. Crawley

• Number of ECTS: 5
• Course number: MScFE-38
• Module(s): Module 1.D.Mathematics and Data Analysis I
• Language: EN
• Mandatory: No

–          To  conduct econometric analyses involving cross sectional and panel data –          Understand the theoretical foundation of Econometrics; –          Be able to estimate models with the Stata econometrics software; –          Undestand the concept of hypothesis testing; –          Understand the consequences of deviations from key assumptions behind OLS estimation. –          Understand the issue of unobserved heterogeneity in panel data –          Be able to use simple panel estimators  

Chapter 1: Reminders about OLS regression Chapter 2 : Multiple Regression Model. Inference, reminders-          Hypothesis testing (follow up) Chapter 3: Additional problem in multiple regression models-          Units of Measurement-          More on Functional Form-          More on Goodness-of-Fit and Selection of Regressors  Chapter 4: Additional problem in multiple regression models (follow-up):Prediction Intervals and Residual Analysis  Chapter 5: Multiple Regression Models with Qualitative Information. Dummy Variables-          MLR with binary variables Chapter 6: Heteroskedasticity-          Consequences of Heteroskedasticity for OLS-          Heteroskedasticity-Robust Inference-          Testing for Heteroskedasticity Chapter 7: Panel data-          Unobserved heterogeneity-          Types of panel estimators-          Fixed effect estimator-          Random effect estimator-          First differences-          Applications 

Written exam (3 hours)

Literature: Introductory Econometrics: A Modern Approach, 5e, South-Western, Cengage Learning by Jeffrey M. Wooldridge, 2013, ·   ISBN-10: 1111531048   ·   ISBN-13: 9781111531041

• Number of ECTS: 3
• Course number: MScFE-25
• Module(s): Module 1.F.Fundamentals of Financial Markets, Investments and Microeconomic theory
• Language: EN
• Mandatory: Yes

–       Grasp the meaning of fintech –       Discover the impact and opportunities brought by fintech       Know what is a pitch and learn more about the life of a fintech       The main objective of this course is to understand the financial markets by understanding the role of its main actors, their services, their instruments and a big picture of the main processes that support the functioning of the markets. I.1.5 Financial instruments (4 Units) Distinguish and understand the basic features of the main available financial instruments, advantages and disadvantages Distinguish between short-term and long-term financial instruments Understand how financial instruments are used and when the different financial instruments are most useful   I.1.6 Asset management & Fund industry actors (CM) (2 Units) Getting to know and being able to distinguish the main financial players across the Fund industry Understand their different roles and responsibilities Understand the interaction and mutual dependency of the different financial players   v II.2 Value chain of the Financial Services industry (4 Units)   -Understand the function of all the participants  in the Market and fund industry sector -Distinguish the global and the Luxembourg market -Distinguish main sectors of the industry   II.3 Products (3 Units) -Understand products and the market -Distinguish the strengths of th e Luxembourg offer in a global market -Understand the next challenges II.4 Overview of main regulations governing Financial Services industry (2 Units)   -Understand impacts of the regulation -Distinguish the fields of applications -Have a global overview of the global legal context    II. 5 Key trends and future of the industry (2 Units) -Understand changes -Distinguish market and technologic changes -Be ready about social and professional impact      

Financial Markets and Institutions-The Luxembourg Financial Centre Part I. Financial Markets and Institutions an Overview of the Financial System (Bernard Simon – FundsDLT) Introduction to Financial Markets EconomyMarket EconomyMarket and the Efficiency Condition Demand, Supply, and Equilibrium Aggregate Demand and Aggregate Supply The Flow of Money through the Economy Concept and characteristics of the financial system Financial assets Financial assets versus tangible assets The role of the financial assets Financial markets  Role of financial markets Primary versus Secondary Markets Market participants Organization & Structure of markets Financial Institutions Direct Finance Indirect Finance Financial Intermediaries Globalization of financial markets Financial intermediaries Financial Institutions Regulation of financial markets & Authorities Central bank & Monetary Policy Money & Credit Banks and Money Creation Banks Liquidity management & Risk management Banks & Payment Asset management & Fund Industry Actor Pension funds & Insurance Companies Financial Markets and Institutions-The Luxembourg Financial Centre Part II. Luxembourg market & Market Regulation  (Nicolas Deldime – Arendt Regulatory & Consulting) Luxembourg market 1. The Luxembourg market – specificities Historical context of the Luxembourg market transformation Tax and banking secrecy – evolutions Banking secrecy – globalisation and offshoring Regulatory flexibility – Luxembourg toolbox First mover approach – regulatory convergence Competitiveness of Luxembourg The Luxembourg financial sector community – connected people and community of interest 2. Key Luxembourg financial sector domains Role of the financial sector Key Luxembourg financial sector domainso Bank – one word, hundreds of serviceso Professionals of the Financial Sectoro What is a fund? What is asset management? The regulated funds – history and characteristics Fund vehicles Why funds are important? The Luxembourg fund industry Who manages funds? Asset management delegation model Key stakeholders – The fund complex Other stakeholderso Insuranceo Unit-Linked life insurance policy 3. Why financial sector activities are regulated? Financial crisis – regulatory acceleration What does it mean to be regulated? Overview of main regulations governing Financial Services industryo Investor protection ruleso Organisational ruleso Prudential ruleso Tax ruleso EU Passporto Securities Market functioningo Anti-Money Laundering / counter terrorism financingo The choice of investors Financial Markets and Institutions-The Luxembourg Financial Centre Part III. Financial Instruments and Actors on the Financial Markets (Laura Ubbenhorst – GLL Real Estate Partners) Financial Market Primary & Secondary Market Money Market vs. Capital Market Money Market Instruments- Derivatives- Short-term interest bearing instruments- Discount instruments Capital Market Instruments- Bonds- Shares- Bonds vs. Shares Alternative Investments- Strategies Actors of the Financial Market The Financial Market in Luxembourg Investment Funds in Luxembourg Management Company / AIFM Asset Manager / Investment Manager Central Administration Depositary Bank Auditor Distribution Agent Domiciliation Agent Legal Adviser CSSF RCS & RBR The lifecycle of a Fund – Example Financial Markets and Institutions-The Luxembourg Financial Centre Part IV. Luxembourg financial Centre, Limits and developments, Future and Technology (Dariush Yazdani – PwC Global AWM Research Centre) Luxembourg financial Centre How can you invest your money? What is a mandate? What is an investment fund? Advantages & disadvantages of an investment fund Life cycle of a fund Fund distribution value chain Portfolio management value chain Main risks when investing in investment fund Alternative investments Assets classes – risk vs. Return Worldwide assets European assets Cross-border funds Evolution of cross-border distribution Luxembourg assets Private banking products Discretionary Portfolio Management (DPM) Advisory Portfolio Management (APM) Wealth structuring Private Banking and Wealth Management sector Private Banking Insurance products Traditional life insurance product Unit-Linked life insurance products Reinsurance products Insurance sector Insurance The impact of COVID-19 on countries will come in three waves COVID saw global GDP plummet and market volatility skyrocket in Q1 Global markets posted a record-breaking recovery in Q2 S&P recovered to an all-time high, but the future remains Second-order effects could cause a late negative impact The impact of COVID-19 on future GDP of the region What does the future hold? 3 potential recovery scenarios At a European level, post-GFC mistakes must be avoided Limits and developments: Global competition and client expectations Pressures intensify from all angles Revenues to AuM ratio of traditional AMs has declined in line with management fees Four trends that will transform AWM industry Key trends and future of the industry ESG investing will grow due to increased demand from institutions Environmental and social mandates are most demanded by investors within ESG Independent verification of ESG disclosures could increase the trust of investors With a US$30tn wealth transfer in the future millennials will be a key driver for increased ESG investment Green bonds offer similar risks and returns An overview of ESG in numbers The Luxembourg and global players facing new trends and new technology Limited Fintech funding in Europe Most Fintech Unicorns are based in the US PSD 2 spurred competition in the payment industry Digital payments’ transaction value reached USD 2.9tn in 2017 European crowdfunding market is underdeveloped New approach of the wealth management Current asset management distribution Future asset management distribution models: the four strategic options Robo advisors will grow faster in China compared to Europe Digitising distribution and client engagement Digitalisation and automation Transform through technology – or be eliminated Investing in digital technologies to improve margins Increasing artificial intelligence investments Managers will need to focus on the four key themes Financial Markets and Institutions-The Luxembourg Financial Centre Part V. Fintech Introduction (Emilie Allaert – The LHoFT) Fin..What ? The origin An Ecosystem-FINTECH: A Whole World Evolution: What does qualify as evolution Leapfrogging: How technology does not advance at the same pace everywhere Fundtech Payments Insurtech Regtech Blockchain Artificial Intelligence Big Data Cybersecurity    

Financial Markets and Institutions – The Luxembourg Financial CentreI. Financial Markets and Institutions (14 units)I.1. Financial Markets, Intermediaries, Primary and Secondary Markets – Bernard SIMONI.2. Financial Instruments, Asset management and Fund industry – Laura UBBENHORSTII. Luxembourg Financial Centre (14 units)II.1. Introduction to the Financial Services industry in Luxembourg, Value chain of the Financial Services industry, Overview of main regulations governing Financial Services industry – Nicolas DELDIMEII.2. Introduction to the Financial Services industry in Luxembourg, Statistics & academic approach Global market figures, trends Luxembourg‘s facts and figures Products, Key trends and future of the industry- Dariush YAZDANISeminary : Startup & Fintech in the Financial Market – Emilie ALLAERT

Written exam (3 hours)

Literature: The Fourth Industrial Revolution by Klaus Schwab Complementary literature (to deepen the subject, this literature is not compulsory)Foundations of Financial Markets and Institutions: Pearson New International Edition by Frank J. Fabozzi (Autor), Franco P. Modigliani (Autor), Frank J. Jones (Autor)The New Lombard Street: How the Fed Became the Dealer of Last Resort Hardcover by Perry Mehrling (Autor)  

• Number of ECTS: 3
• Course number: MScFE-26
• Module(s): Module 1.F.Fundamentals of Financial Markets, Investments and Microeconomic theory
• Language: EN
• Mandatory: Yes

Prepare and understand basic accounting entries Prepare and understand the content of the financial statements of a company Apply basic financial ratios to the F/S of a company Understand the specific investor reporting requirements of an alternative investment fund in Luxembourg

Financial accounting architecture, mechanisms and conventions // Structure and content of the key statements (Balance sheet, profit and less accounts, annex, cash flow) // Key financial ratios // Investor reporting requirements(case of an alternative investment fund)

Written exam

• Number of ECTS: 4
• Course number: MScFE-27
• Module(s): Module 1.F.Fundamentals of Financial Markets, Investments and Microeconomic theory
• Language: EN
• Mandatory: Yes

Understand and use analytical techniques in the field of fixed-income securities (present value, forward rates, yield-to-maturity, term structure theories, duration calculation and management of interest rate risk);   Acquire the key fundamentals for investing in fixed income securities issued by sovereigns, banks and corporates.

Introduction to Fixed Income Instruments: Features of Debt SecuritiesBond Sectors and Instruments: Sovereign, Agency, Corporate Bonds, Asset BackedPrimary and Secondary MarketsRisks Associated with Investing in BondsIntroduction to the Valuation of Debt SecuritiesYield Measures, Spot and Forward RatesMeasurement of Interest Rate RiskTerm Structure and Volatility of Interest RatesInterest Rate Derivatives and Valuation of Interest Rate DerivativesCredit Analysis and Credit RiskIntroduction to Bond Portfolio Management Managing Funds against a Bond Market IndexPortfolio Immunization and Cash Flow Matching

Written exam

Literature: Fixed Income Analysis (Third edition) by Barbara S. Petitt, Jerald Pinto, Wendy Pirie, CFA Institute Investment Series, Wiley. Fixed Income Analytics by Kenneth D. Garbade, MIT Press Credit Risk Measurement by A. Saunders, Wiley Frontiers in Finance

• Number of ECTS: 5
• Course number: MScFE-28
• Module(s): Module 1.F.Fundamentals of Financial Markets, Investments and Microeconomic theory
• Language: EN, FR
• Mandatory: Yes

Understand and explain the key concepts of Modern Portfolio Theory (MPT). Understand how investor preferences can be represented. Have a good grasp of the distributional and preference assumptions underlying mean-variance analysis. Understand the principle of diversification in portfolio management. Analyze the relationship between risk and return in the context of MPT. Construct mean-variance optimal portfolios for a single investment horizon to achieve investment objectives. Understand the role of the risk-free asset and its integration into portfolios. Have a good understanding of asset pricing in the mean-variance framework and of the Capital Asset Pricing Model (CAPM) in particular; have a deep understanding of its underlying assumptions; critically assess the strengths and weaknesses of the CAPM. Learn mathematical techniques for optimizing portfolios; understand the impact of constraints in portfolio optimization; implement portfolio optimization using software tools and real-world data. Critically assess MPT, including its underlying assumptions about the distribution of stock returns and investor behavior. Gaining proficiency in French (for students who choose to follow the course in French)

The objective of this course is to give students a thorough understanding of mean-variance optimization. Specifically, it addresses the question of choice under uncertainty – i.e. investment decisions when returns are uncertain. It introduces the students to the concepts of risk and return and the role of diversification in reducing portfolio risk. The course further focuses on the investors’ objectives in terms of their preferences for risk and return. It proceeds by delineating the optimum investment possibilities that can be constructed from the available set of investment opportunities. In that framework, students will learn how to construct optimal portfolios, maximizing the expected return given a certain amount of risk, which provides the basis for investment strategies widely applied by portfolio managers.      The course is structured as follows.  IntroductionChoice Theory under UncertaintyModern Portfolio Theory: The Basic Portfolio ProblemThe Portfolio Management ProcessInvestor PreferencesRisk AversionMean-Variance Utility FunctionsIndifference CurvesThe Optimal Portfolio Selection ProblemMean, Variance and Covariance of Asset ReturnsRandom ReturnsMean and Variance of ReturnsCovariance and Correlation of Returns Using Historic Data: Time Series vs. Scenario Analysis; Sample vs. PopulationMean and Variance of Portfolio ReturnsPortfolio ReturnMean Return of a PortfolioVariance of a Portfolio ReturnVariance-Covariance Matrices and Covariance between Two PortfoliosPortfolio DiversificationSystematic vs. Unsystematic RisksThe Concept of DiversificationThe Power of Diversification and its LimitsPortfolio Analysis with Two Risky AssetsThe Investment Opportunity SetThe Minimum-Variance PortfolioThe Efficient FrontierThe Optimal Portfolio for the InvestorIntroducing a Risk-Free AssetThe Markowitz Portfolio Optimization ModelThe Efficient Frontier of Risky AssetsThe Optimal Risky PortfolioThe Optimal Complete PortfolioCapital Allocation and the Separation TheoremPortfolio Analysis with N Risky Assets: Analytic SolutionsEfficient Portfolios Without a Risk-Free AssetBlack’s Two-Fund TheoremEfficient Portfolios with a Risk-Free AssetThe Capital Asset Pricing ModelAssumptionsThe Market Portfolio and the Capital Market LineDeriving the CAPM EquationThe Security Market LineUsing the CAPM

– Written exam 2hrs  

Literature: David G. Luenberger, Investment Science, Oxford University Press, 2nd edition. Jack Clark Francis and Dongcheol Kim, Modern Portfolio Theory, Wiley Finance. Zvi Bodie, Alex Kane, and Alan J. Marcus, Investments, Mc Graw Hill.   Additional reading: Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann, Modern Portfolio Theory and Investment Analysis, Wiley. Barucci E. and C. Fontana, Financial Markets Theory, Springer. Simon Benninga, Financial Modeling, MIT Press. Morris DeGroot and Mark Schervish, Probability and Statistics, Pearson New International Edition, 4th edition.

• Number of ECTS: 5
• Course number: MScFE-29
• Module(s): Module 1.F.Fundamentals of Financial Markets, Investments and Microeconomic theory
• Language: EN
• Mandatory: Yes

During the course, students learn analytical tools and theoretical foundations necessary for any specialization at upper-level such as labor economics, industrial organization, international trade, public finance etc..

This course presents in an accessible fashion all the essential topics in microeconomics typically required at the intermediate level for students in economics and finance.  It first covers the topics of consumer and producer theory moves on to that of market structure (perfect competition, monopoly, monopsony, oligopoly). It also introduces notions of risk, game theory, general equilibrium (exchange economy), externalities, asymmetric information, and public goods.

Written Exam 80% Homework and class participation 20%

Literature: The course is articulated around the textbook Intermediate Microeconomics by Samiran Banerjee. The purchase of the book is not compulsory, lectures are self-contained, so are the TDs.

• Number of ECTS: 2
• Course number: MScFE-34
• Module(s): Module 1.O.Programming (extra curriculum)
• Language: EN
• Mandatory: No

Plot graphs in Excel •           Handle dates and time in Excel •           Use built-in functions in Excel •           Implement sensitivity analysis in Excel •           Be more productive in Excel using macros, shortcuts, named variables •           Write programs in VBA •           Debug programs in VBA •           Call VBA functions from Excel •           Write VBA subroutines •           Generate VBA subroutines by recording a sequence of actions •           Use Excel to prototype complex functions in VBA •           Work with random variables and perform basic statistical analyses •           Generate financial reports in pdf.

•           Plot graphs in Excel •           Handle dates and time in Excel •           Use built-in functions in Excel •           Implement sensitivity analysis in Excel •           Be more productive in Excel using macros, shortcuts, named variables •           Write programs in VBA •           Debug programs in VBA •           Call VBA functions from Excel •           Write VBA subroutines •           Generate VBA subroutines by recording a sequence of actions •           Use Excel to prototype complex functions in VBA •           Work with random variables and perform basic statistical analyses •           Generate financial reports in pdf.

Part I: Core knowledge Topic 0 Introduction to the course Topic 1 Excel Essentials•           Presentation of Excel•           Basic manipulations in Excel and some built-in functions•           Sensitivity analysis in Excel•           Optimization analysis in Excel Topic 2 Introduction to programming with VBA•           Writing (small) programs in VBA•           Functions and control structures in VBA•           VBA subroutines Part II: Financial Modeling with VBA Topic 3 Use of VBA routines in a realistic set up•           Case study of the performance of a portfolio insurance strategy•           Present how people use Excel and VBA in practice•           Stimulate ideas regarding how to use Excel in your professional life Topic 4 Topics in Excel / VBA•           Working with random variables•           Loops and conditional statements•           Generating a financial report

30% Homework 1 + 70% Homework 2

Literature: Benninga, S., & Mofkadi, T. (2022). Financial modeling, fifth edition. MIT Press. (Recommended)   Winston, W. (2021). Microsoft Excel Data Analysis and Business Modeling (Office 2021 and Microsoft 365) (7th ed.). Microsoft Press. (Recommended)

• Number of ECTS: 5
• Course number: MScFE-42
• Module(s): Module 2.D: Data Analysis II
• Language: EN
• Mandatory: No

Use adequately the data analysis techniques presented in class Quickly learn and critically assess new data analysis techniques on their own.

Elements of Hilbert SpacesReview of regressionLogistic regressionReview of constrained optimization theoryRidge regressionLasso regressionDecision treesRandom forestSupport Vector MachineNeural network

Written 2hr  + pop quizz + participation

Literature: M. Taddy, Business Data Science, New York: McGraw-Hill Education, 2019. Stéphane Tuffery, Data Mining and Statistics for Decision Making, Wiley series in computational statistics, Wiley. Trevor Hastie, Robert Tibshirani, Jerome Friedman (2009). The Elements of Statistical Learning. Available at https://web.stanford.edu/~hastie/ElemStatLearn/. J. Angrist and J-S. Pischke, Mostly Harmless Econometrics, Princeton: Princeton University Press, 2009. Further handouts and recommended readings relevant for the course and the examination will follow in due course, as discussed in class

• Number of ECTS: 5
• Course number: MScFE-43
• Module(s): Module 2.D: Data Analysis II
• Language: EN
• Mandatory: No

–        Formulate a research question and its related hypothesis to test empirically; –        Use statistical software (STATA) to gather, organize and process data to answer a research question; –        Use statistical software to produce graphs and tables to be used in scientific reporting ; –        Discriminate between identification strategies to answer a research question; –        Interpret the output of empirical research in scientific journals.

The objective of the course is twofold. First, it aims to familiarize students with research designs and the different tools economists use to identify causal relationships. Second, it intends to train students with data manipulation.  The course starts with a complete presentation of what research design and causality means. The second part of the course presents the economist toolkit to identify causal estimates (including panel data regressions, difference-in-differences, regression discontinuity designs, instrumental variables and randomized control trials).  During the semester, students will apply the content of the course to realize a research project of their own.

Oral exam 20% Take-home: 80%  

Literature: The required text for this course is “The Effect: An Introduction to Research Design and Causality” by Nick Huttington Klein, Chapman and Hall/CRC, 2021.

• Number of ECTS: 5
• Course number: MScFE-44
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: EN
• Mandatory: No

On completion of the course unit successful students will be able to:• evaluate real assets, focus on (venture capital)• evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market• describe major categories of equity valuation models• describe regular cash dividends, extra dividends, stock dividends, stock splits, reverse stock splits, and share repurchases; • describe dividend payment chronology• explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-equity models• calculate the intrinsic value of a non-callable, non-convertible preferred stock• calculate and interpret the intrinsic value of an equity security based on the Gordon (constant) growth dividend discount model or a two-stage dividend discount model, as appropriate• identify characteristics of companies for which the constant growth or a multistage dividend discount model is appropriate• explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals, and the use of multiples based on comparables

This course will introduce the student to spreadsheet models, modeling techniques, and common applications for investment analysis, company valuation, forecasting, and more. It will introduce real life examples with a focus in the Equity Market and the Venture Capital market (startups).Valuation is not simply a numerical analysis. The choice of model and the derivation of inputs require skill and judgment.The equity valuation models used to estimate intrinsic value—present value models, multiplier models, and asset-based valuation—are widely used and serve an important purpose. When valuing a company or group of companies, the student wants to choose a valuation model that is appropriate for the information available to be used as inputs. The available data will, in most instances, restrict the choice of model and influence the way it is used. Complex models exist that may improve on the simple valuation models described in this reading; but before using those models and assuming that complexity increases accuracy, the student would do well to consider the “law of parsimony:” A model should be kept as simple as possible in light of the available inputs. Valuation is a fallible discipline, and any method will result in an inaccurate forecast at some time. The goal is to minimize the inaccuracy of the forecast.

50% seminar paper50% presentation case

Bibliography: Tim Koller, Marc Goedhart and David Wessels (2010) “Valuation: Measuring and Managing the Value of Companies”, 5th Edition (Wiley Finance) by McKinsey and Company Inc. Aswath Damodaran, (2009) “The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses” Barclays Capital (2011) “Equity Gilty Study” Berk, Jonathan y Peter DeMarzo (2006) “Corporate Finance” Bodie, Kane and Marcus (2003) "Investments" McGraw-Hill (BKM) Citigroup (2011) “The Fundamentals: Equity Valuation” Morningstar (2011) “Equity Research Methodology” Schweser “Financial Reporting and Analysis”. CFA Nivel 1 Schweser “Corporate Finance, Portfolio Management and Equity Investment”. CFA Nivel 1 Schweser “Equity Investment”. CFA Nivel 2 Beneda, N. L., 2003. Estimating free cash flows and valuing a growth company. Journal of Asset Management, 4(4), 247–257 Black, E., 2003. Usefulness of financial statement components in valuation: An examination of start-up and growth firms. Venture Capital, 5(1), 47–69 CFA Institute, 2016. Alternative Investments and Portfolio Management. CFA Program Curriculum 2016, Level I, Volume 6. Damodaran, A., 2011. The Little Book of Valuation: How to Value a Company, Pick a Stock and Profit. John Wiley & Sons. Damodaran, A., 2018. The Dark Side of Valuation, Valuing young, distressed and complex businesses, 2nd Edition. Sahlmann, W. A., & Scherlis, D. R., 1987. A method for valuing high-risk, long-term investments: The “Venture Capital Method.” Harvard Business School Publishing. CFA Institute, 2016. Alternative Investments and Portfolio Management. CFA Program Curriculum 2016, Level I, Volume 6. Damodaran, A., 2011. The Little Book of Valuation: How to Value a Company, Pick a Stock and Profit. John Wiley & Sons. Damodaran, A., 2018. The Dark Side of Valuation, Valuing young, distressed and complex businesses, 2nd Edition. Sahlmann, W. A., & Scherlis, D. R., 1987. A method for valuing high-risk, long-term investments: The “Venture Capital Method.” Harvard Business School Publishing. Kothari, M., Ranka, N. M., and Sharma, L., 2013. Intangible Assets: A Study of Valuation Models Measurement Subsequent to Acquisition : Cost Model and Revaluation Models. Research Journal of Management Sciences, 2(2), 9–13. Kothari, M., Ranka, N. M., and Sharma, L., 2013. Intangible Assets: A Study of Valuation Models Measurement Subsequent to Acquisition : Cost Model and Revaluation Models. Research Journal of Management Sciences, 2(2), 9–13.

• Number of ECTS: 5
• Course number: MScFE-45
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: EN
• Mandatory: No

The student studies the theoretical concepts of capital budgeting and valuation, learns how to solve problems and to apply the theoretical concepts to real world data. Students learn to value the equity and debt investments in existing corporations.

Return and risk Capital asset pricing modelCost of equity and cost of capitalEfficient market hypothesis, behavioral finance & beauty contest Financial structure of the corporate firm Limits to the use of debt, financial distressLeverage and valuation – flow to equity – flow to the firm – adjusted present valueIntroduction to financial options and pricing of real optionsTopics: M&A, Corporate governance, short-term finance, etc. The course introduces students to corporate finance. The course builds on the capital asset pricing model. Systematic and unsystematic risks of assets are discussed in the contexts of the capital market line and the security market line. Making use of the Modigliani and Miller theorem of optimal capital structure with and without taxes, students learn how to value bonds, stocks and projects applying three different discounted cash-flow approaches. We discuss the flow-to-equity approach, the APV approach, and the WACC approach. Furthermore, the course introduces to relative valuation and option valuation. Financial issues will be discussed that impact the business organisation including financing, capital budgeting, dividend payouts, capital structure, agency issues, financial and business risk. Throughout the course, the theoretical concepts are illustrated through text book problems and real-world applications. We set-up and apply financial spreadsheets to data gathered in real-time from internet sources. 

100% written

Literature: The course will be based on the following text books:   Corporate Finance by Ross / Westerfield / Jaffe / Jordan Corporate Finance by Berk / DeMarzo Corportate Finance – A Focused Approach Erhardt / Brigham Investment Valuation by Damodaran   Additional reading will be provided during the course.

• Number of ECTS: 5
• Course number: MScFE-46
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: EN
• Mandatory: No

Demonstrate a working knowledge of the principles of financial derivatives Understand how derivative markets work Interpret the particular role of over-the-counter markets Apply concepts of no-arbitrage and risk neutral valuation Determine prices of derivatives like futures and options Understand how particular risk exposures can be hedged Deal with the ‘greeks’ of an option portfolio Understand option strategies Define the risk profile of a commodity-based strategy, recommend on risk-mitigation tactics (hedging) using various paper hedging techniques

Over the last decades, firms have been increasingly challenged by financial price risks due to unpredictable movements in stock prices, exchange rates, interest rates and commodity prices. The financial markets have responded by continuously developing a range of financial instruments, called derivatives. By the end of the course you will have a good knowledge of how these contracts work, how they are used for hedging using real-life experience, and how they are priced.

100% written exam

Literature: For example: Hull, John: Fundamentals of Futures and Options Markets, Pearson/Prentice-Hall or similar introductory derivatives textbook

• Number of ECTS: 5
• Course number: MScFE-47
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: EN
• Mandatory: No

 

The main objective of this course is, per force, limited to develop participants’ awareness of how the theory and practice of financial stability are supported by recent developments in a wide variety of areas such as open economy macroeconomics, microeconomics, finance, financial regulation, accounting and econometrics. A corollary is to stimulate students’ curiosity in research in this field.   Expected learning outcomes are: good understanding of the interaction between liquidity and systemic risk; identifying the basic elements of an operational financial stability framework; how financial stability can be assessed and monitored; the weaknesses and strengths of the different systemic risk measures currently available and their relationship with financial and business cycles; early-warning systems. Reference will be made also as to how SARS-COV-2 has reshaped the future financial landscape as well as to two themes: the impact of digital currencies and climate change on financial stability.  

The theory of financial stability is one of the most rapidly evolving areas in economics and this trend has accelerated due to concerns on digital currencies and climate change on the financial system. From a policy perspective, preserving financial stability is increasingly viewed as the objective of macro-prudential policy. The aim of this short course is, per force, limited to develop participants’ awareness of how the theory and practice of financial stability are supported by recent developments in a wide variety of areas such as open economy macroeconomics, microeconomics, finance, financial regulation, accounting and econometrics, and also stimulate their curiosity in research in this field. The course is based on the premise that sound policy advice requires robust theory, and thus it stresses the use of models to understand facts and the observation of facts to evaluate models. The short duration of the course prevents a thorough development of the underlying theories. However, whenever necessary, references will be provided to complete the presentation of class material that is intended to be self-contained. The course trades off the breadth of knowledge required in financial stability with depth of knowledge in favour of the former. The course analyses the concepts of financial stability and macro-prudential policy. It introduces the main international and regional institutional actors and provides an overview of the major ongoing and forthcoming regulatory and supervisory changes. Emphasis is put on the basic elements of the operational framework required for preserving financial stability. Systemic risk identification and measurement as well as the coordination between macro-prudential and monetary policies are examined. This year, digital currencies and climate changes implications for financial stability will play an important role in the pertinent areas of the Course. The role of climate change and its impact on the resilience of banks and non-bank financial intermediaries is a novel and much demanded part of the Course.

Seminar paper chosen in agreement with professor 80% Class participation has a 20% weight in student’s assessment

Literature:   There is no main textbook available that would fit the course content closely. Class slides are compulsory reading. Recommended references follow and are intended to provide additional information on the topics covered during the course. Additional references will be provided during the course when needed and also following students’ special requests.  

• Number of ECTS: 5
• Course number: MScFE-48
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: FR
• Mandatory: No

A l’issue de ce cours, les étudiants devraient être capables : – de mobiliser les principaux outils macroéconomiques permettant d’analyser les interdépendances financières internationales ; – d’expliquer les principaux déterminants de l’évolution des taux de change ; – d’analyser les contraintes de différents régimes de change ; – de comprendre les principaux mécanismes des crises de change

Le cours traite des thèmes suivants: 1. Analyse économique des régimes de change ; 2. Détermination du taux de change réel par les échanges de biens et services (règle de parité de pouvoir d’achat ; Effet Balassa–Samuelson ; Taux de change réel dans un modèle d’économie dépendante à trois biens ; taux de change d’équilibre) ; 3.Interdépendances financières internationales (Règle de parité de taux d’intérêt et mesure de l’intégration financière internationale ; Modèle de change fondé sur le choix de portefeuille ; Overshooting) ; 4. Modélisations et enseignements des crises de change.

seminar paper 70 % presentation 30%

Literature: Bénassy-Quéré Agnès, Economie monétaire internationale, 2e éd 2015. Copeland Laurence, Exchange Rates and International Finance, Pearson, 2014 Bénassy-Quéré A., Coeuré B., Jacquet P., Pisani-Ferry J., Economic Policy: Theory and Practice, Chap 5.

• Number of ECTS: 5
• Course number: MScFE-49
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: EN
• Mandatory: No

Students will be able to get a clear understanding of the before and after crisis monetary policy stance of notably the ECB and thr FED and of the theoretical  underpinnings of the latter.

Students are introduced to key theoretical and empirical considerations concerning monetary theory and monetary policy.

Literature: Allen Blinder, After the Music Stopped, The Financial Crisis, the Response and the Work Ahead, Penguin Books, 2013. Papadia and Valimaki central banking in turbulent times ecb and fed public documents

• Number of ECTS: 5
• Course number: MScFE-50
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: EN
• Mandatory: No

Understand the nature of public finance and the role of public sector Understand the decision making process of public officials Understand organization, decentralization and competition of public funding and institutions Evaluate tax incidence, evasion and tax structure Understand public pension funding issues Understand public role in correcting global externalities (carbon emissions) Get knowledge of academic literature in Public Finance and Public Economics Develop an independent research Aquire writing skills Present research results orally

This course covers economic studies of contemporary issues in public finance issues. The economic understanding of public finance issues is essential in modern economies where at least a third of economic activities relate to government and public institutions. In many circumstances, experts in Economics and Finance are asked to advise federal and local government officials on the public finance of health, education, justice, infrastructure, scientific research, justice, economic development, etc. Experts also counsel about the economic and financial impact of government intervention in private markets like agriculture, housing, space, etc.  The focus of the course is on application of analytical tools to key policy issues relating to the spending, taxing and financing activities of government. The course gives students an appreciation of the analytical methods in economics for the study of the public sector and the role of the state in principle and in practice. It provides a thorough grounding in the principles underlying the role of the state, the design of social insurance and the welfare state, the design of the tax system, the scope of the government, etc. The objective is to enable students to understand the practical problems involved in implementing the principles of public finance.The course aims at covering topics like public sector statistics, theories of public finance, tax evasion, tax incidence, tax competition, government decentralization, financing social security and pension, carbon emission and externality management, privatization and outsourcing, etc. The course also aims at training students to formulate questions and solutions for specific issues in public finance and public intervention. Students are asked to develop their skills to organize and develop a short policy research on a specific public finance question. Students shall acquire or improve their writing and presentation skills.

50% seminar paper 30% presentation 20% Class and tutorial participation

Literature: Main readings: Intermediate Public Economics (2013), Hindrickx J. and Myles G.D., Cambridge press Public Finance and Public Policy (2019), Jonathan Gruber, MacMillan Economics of the Public Sector (2015), Stiglitz and Rosengard, W. W. Norton & Company Journals: International Tax and Public Finance, Journal of Public Economics, etc.

• Number of ECTS: 5
• Course number: MScFE-51
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: EN
• Mandatory: No

Students completing the course should be able to: Understand the risk structure of bank balance sheets using annuity analysis. Understand how to price stocks and bonds using the Lucas-tree model, and the linkups between macroeconomic performance, stock prices, and bond interest rates. Study bank fragility through the Diamond-Dybvig model. Use the Kiyotaki-Moore model in order to understand how credit cycles can create an environment that encourages excess risk-taking by banks. Understand some determinants of credit rationing. Model how interbank loan markets can help banks in order to pool risks in order to provide robust deposit contracts

This course intends to provide a clear analysis of questions such as, how banks complement existing capital markets, how banks can potentially increase social welfare, why asset-price fluctuations can be severe and cause problems to banks, why there can be credit cycles and credit-rationing challenges, and how poor credit-rationing channels can be mitigated by interbank markets and Central-Bank regulation. The course pays attention to providing an understanding of market forces behind bank competition, asset-market fluctuations, credit cycles and bank fragility. By understanding deep microeconomic determinants and fundamentals of market forces in capital markets and the interplay between creditors and borrowers along cycles, students should be able to gain insights on the changing bank regulatory environment and on how to adapt to new borrowing/lending technological innovations.

Written Exam : 70% Problem sets and Homework assignments: 30%

LITERATURE: Microeconomics of Banking" by Xavier Freixas and Jean-Charles Rochet (MIT Press 1 st or 2nd edition)

• Number of ECTS: 5
• Course number: MScFE-55
• Module(s): Module 2.E: Special Topics in Finance and Economics – Electives I
• Language: EN
• Mandatory: No

–       Apply practical skills and strategies to policy-related projects. –       Think critically about the policy process using analytical frameworks and develop a firm understanding of the challenges and politics of public policy. –       Analyse evidence-based impact evaluations and effective policy communications skills.

The course is designed to provide hands-on insights into evidence-based policy advice. Using selected topics from the field of public policy, students will receive an introduction to assessing the available policy-relevant evidence in the academic literature. Each topic is complemented by a critical assessment of limitations to implementation posed by conflicting interests of constituents, policymakers, and affected interest groups. The course is designed to enable students to reflect critically on the role of evidence-based policy advice. Examples are to be taken from active labor market policies, welfare policies, housing policies, financial education, development policies, climate policies and the like.

Seminar paper

Literature: Altmann, S.; Grunewald, A.; Radbruch, J. (2021): Interventions and Cognitive Spillovers. Review of Economic Studies Card, D.; Kluve, J.; Weber A. (2010): Active Labor Market Policy Evaluations – A Meta-Analysis. The Economic Journal, 120, F452–F477. Doi: 10.1111/j.1468-0297.2010.02387.x Card, D.; Krueger, A. (1994): Minimum Wages and Employment – A Case Study for the Fast Food Industry in New Jersey and Pennsylvania. American Economic Review, 84, 4, 772-793 Chang A.C.; Li, P. (2017): A Preanalysis Plan to Replicate Sixty Economics Research Papers That Worked Half of the Time. American Economic Review, 107, 5, 60-64. DOI: https://doi.org/10.1257/aer.p20171034 Fernandes, D.; Lynch, J.G.; Netemeyer, R.G. (2014): Financial Literacy, Financial Education, and Downstream Financial Behaviors. Management Science, 60, 8; 1861-1883. Doi: https://doi.org/10.1287/mnsc.2013.1849 Gough, D.; Thomas, J.; Oliver, S. (2012): Clarifying differences between review designs and methods. Systematic Reviews, 1, 28; https://doi.org/10.1186/2046-4053-1-28 Neumark, D.; Wascher W. (2007): Minimum Wages and Employment. Foundations and Trends in Microeconomics, 2007, 3 (1+2), 1-182 Oliver, K; Cairney, P. (2019): The dos and don’ts of influencing policy: a systematic review of advice to academics. Humanities and Social Sciences Communications, 5, 21; https://doi.org/10.1057/s41599-019-0232-y

• Number of ECTS: 5
• Course number: MScFE-40
• Module(s): Module 2.F: Asset Pricing and Macroeconomic Theory
• Language: EN
• Mandatory: Yes

 Take informed financial decision.  Price basic financial assets  Understand the motivations and incentives of financial market participants  

Outline Elements of Mathematics for FinanceValuation by no-arbitrageConsumption-based asset pricingFactor modelsInformation and market efficiency Depending on time, the above outline can be changed

Written 2hr  + pop quizz + participation

LITERATURE: Emilio Barucci and Claudio Fontana, Financial Markets Theory, Springer, 2017 (2nd edition). Demange, Gabrielle, and Guy Laroque. Finance and the Economics of Uncertainty. Blackwell, 2005. Cochrane, John H. Asset pricing: Revised edition. Princeton university press, 2009. During the course there will be hand-outs and other material on additional topics relevant for the course and the examination

• Number of ECTS: 5
• Course number: MScFE-41
• Module(s): Module 2.F: Asset Pricing and Macroeconomic Theory
• Language: EN
• Mandatory: Yes

Use the framework developed in class to study questions such as: • What determines output, consumption, investment?• What causes recessions?• What causes financial crises?• How do macroeconomics and finance interact?• What is the relationship between fiscal deficit and current account deficit?• What determines inflation?• What are the factors accounting for the recurrent fluctuations in employment and output called the business cycle?• What factors account for exchange rate fluctuations? We will not provide definitive answers to these questions. However, we will present a framework for thinking about these questions and for reviewing the various sides in the debates.

This class provides the foundations needed to understand how the macroeconomy operates, with a particular emphasis on the broad economic and financial movements in the global economy. We will construct models to understand the determination of aggregate output, unemployment, prices, interest rates, inflation, and open economy topics, in the short-run and the medium-run, with applications to European economies and discussions of macroeconomic policy issues.

• Problem set 25%• Final 75%

Literature: • Course slides. Disclaimer: the slides serve as supporting material for the lectures and are by design incomplete. You should expect to take notes, as everything that I say in class is potentially examinable. The slides may also contain errors and approximations. If what I say in class deviates from these notes, trust me over the notes. If you see any typos (or even something that just could be clearer), please email me.• The class loosely follows these two textbooks:– Kurlat, Pablo (2020), A Course in Modern Macroeconomics,https://sites.google.com/view/pkurlat/a-course-in-modern-macroeconomics– Schmitt-Grohe, Stephanie, Uribe, Martin and Woodford, Michael (2020), International Macroeconomics,http://www.columbia.edu/~mu2166/UIM/index.html• Additional references:– Romer, D. (2011). Advanced macroeconomics, fifth edition.– Obstfeld, M., & Rogoff, K. (1996). Foundations of international macroeconomics. MIT press. – Terra, Cristina (2015), Principles of International Finance and Open Economy Macroeco-nomics: Theories, Applications and Policies, Academic Press.– Williamson, S. D. (2018). Macroeconomics, 6th. • As the class develops, other references may be assigned for further advanced background readings.• Complementary material, including slides to be used in class, can be downloaded from the course Moodle.  

• Number of ECTS: 1
• Course number: MScFE-52
• Module(s): Module 2.O: Data Platforms (extra curriculum)
• Language: EN
• Mandatory: No

Gaining hands-on experience with the Bloomberg Terminal, students will develop practical skills required in the financial industry. Knowledge of the Bloomberg Terminal enhances CVs of students and places them abreast of the job market competition as graduates who are both intellectually and technically savvy. Students will learn how to grasp complex concepts in a straightforward way using industry-proven analytical tools.   The course also aims at improving the understanding of financial markets and the global economy. Using a popular platform, students will learn about the causality in market events and will learn how to interpret them; and how to analyse financial markets. On successful completion of the course, students will be able to use Bloomberg for their research, investments or future jobs. Furthermore, students will be able to demonstrate an awareness of the functioning of financial markets and various types of risks faced by financial services firms (e.g. FX risk; credit risk).

The introductory course to Bloomberg is a self-learning, interactive module that introduces the Bloomberg Terminal to students. The course consists of concrete examples of using Bloomberg taken from the financial industry and case studies involving the use of the Bloomberg data, Bloomberg news and Bloomberg analytics. The content of the course is focused, among other items related to the professional use of Bloomberg, on the practical use of this platform to explore:historical data extracts for financial collateral haircut calculations and use of fund benchmarks and equity relative indices;some important issues about interest rates; topics of bond total return, various measures of bond return, and the leading factors of return change; basic idea of the meanings of interest rate swap, the swap pricing methods and the corresponding Bloomberg functions; issues concerning carry trade and interest rate parity; aspects of credit rating and using agency ratings for Probability of Default models in credit risk;important aspects of equity trading with Fundamental and Technical Analysis, as well as the use of Bloomberg news;Business Analysis of specific industries from investment and loan granting standpoint;

Seminar paper : 100% – 2,500 word investment analyst report: a student will choose any financial instrument (e.g. fund, equity or Bond) and using Bloomberg will analyse the profitability of investing in this instrument.

Literature: 1. Getting Started on the Bloomberg Terminal (pdf file attached)