Module convenor: Dr Marcel Prokopczuk20 credits

Introduces techniques for analysing and valuing different classes of risky assets. It also develops ways of optimally selecting portfolios of such assets and develops models of how these portfolios may be priced in financial markets. The techniques introduced in this module are widely applied in other elements of the programme. The module includes simulated trading sessions in our state of the art dealing rooms, where participants are introduced to real world pricing and trading strategies (INVEST sessions).

Outline Content: Financial assets and investing in securities markets; Investors and their objectives; Risk and capital allocation; Optimal portfolio selection; Capital asset pricing model; Single index and multifactor models; Arbitrage pricing theory; Derivative securities and the no-arbitrage principle; Forwards and Futures contracts; Simple hedging; Options basic properties and trading strategies.

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Dr George Alexandridis20 credits

Fixed Income and Equity Investments deals with the valuation of fixed income and equity securities. The module focuses on the basic characteristics of each security and the strategies used for approximating their fundamental value and assessing their risk. Its primary aim is to discuss how certain characteristics and relationships can affect the value of fixed income and equity securities and how can they be exploited to form optimal investment strategies. The analytical techniques introduced in this module are widely applied in other elements of the programme.

Outline Content: An introduction to securities,  Applying time-value-of-money (TVM) and probability theory to value financial instruments,  Bond prices and yields, Introduction to default risk, Term Structure of Interest Rates, Interest rate risk, Active Bond Management,  Economic and Industry analysis, Financial Statement Analysis, Equity Valuation, Behavioural Finance and Technical analysis  

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Dr Ogonna Nneji20 credits

The objective of the module is to give students an introduction to econometrics so that they might understand the analytical techniques used in the finance research literature. Via case studies and computer modelling exercises, students then learn how to apply these techniques to real data. Emphasis is placed on practical applications of the techniques in the global financial markets.

Outline Content

• Simple linear regression
• Hypothesis testing
• Multiple regression: the Classical Linear Regression Model (CLRM)
• Violations of the CLRM assumptions and diagnosis
• Non-stationarity and testing for unit roots
• Cointegration and error correction model
• Economic case studies in finance

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenors: Dr Alfonso Dufour  | Professor Brian Scott-Quinn  | 20 credits

Provides knowledge of global financial markets, the importance of liquidity, the distinction between exchange versus OTC markets, primary and secondary markets and the role of intermediaries in their various forms. Participants will gain an understanding of: international stock and bond markets, repo markets (for borrowing/lending on a secured basis); an introduction to foreign exchange and money markets, and to futures markets (which are developed in more detail in optional Part 2 modules); finally specific markets for commodity and energy are studied in more detail.

Outline content

• General introduction to world financial markets
• Liquidity, the distinction between exchange versus OTC markets and the role of intermediaries in their various forms
• Short-term debt securities issued by government and corporations
• Classification of bonds according to issuer: government, agencies, corporate and municipa
• Comparison of bond markets in major countries and a description of the main intermediaries and their role
• Foreign exchange market, quotation conventions, types of brokers, central banks? policies
• Primary and secondary stock markets
• Futures markets
• Commodities markets
• Energy markets.

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Dr Konstantina Kappou20 credits

Having established the theoretical basis for security valuation in Part I, this module extends students’ understanding to the valuation of financial instruments and their applications. The module has a significant practical component with seminars that are designed to support the lecture material. Students will be introduced to all types of risks that are embedded in listed and OTC derivatives across all asset classes. They will become familiar with exotic equity options, understand their pay-offs and some simple analytic pricing approximations. They will value some of the most popular swap varieties, and understand how they may be used for managing risk. They will value caps, floors and swaptions, convertible bonds and understand the interplay between market and credit risk factors. They will outline the basic credit derivatives, including total return swaps, default swaps and collateralized debt obligations.   Outline content

• Equity and FX Futures, Forwards and Options
• Option prices, sensitivities and empirical evidence
• Exotic Options
• Interest Rate Futures, Forwards and Swaps
• Convertible Securities
• Caps, Floors and Swaptions
• Credit Derivatives
• Structured Credit Products (MBS, CDO, ABCP)

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Dr Simone Varotto20 credits

This course introduces students to a set of newly developed techniques to measure and manage credit risk in bank portfolios. In recent years financial institutions have been looking at ways to quantify risk in their corporate loan and mortgage books. The lack of market prices for these types of illiquid assets implies that standard risk assessment procedures can not be employed. The course focuses on (1) default and recovery risk, (2) credit ratings and credit scoring models (3) how to measure portfolio credit risk using contingent claim and credit rating based approaches (4) credit risk management tools and (5) credit risk capital regulation (Basel 2), (6) stress testings and (7) loan pricing. By the end of the module it is expected that students will:

• Understand the relationship between capital and risk;

• Be familiar with the latest credit risk capital regulation;

• Be able to apply Value-at-Risk techniques to portfolios of credit risk sensitive instruments;

• Be able to derive and use credit ratings and credit scores;

• Know how to estimate a credit loss distribution and use it for risk management purposes;

• Understand the main features and implementation of the following models:

• JP MorganÂ’s CreditMetrics

• MoodyÂ’s-KMV model

• Be able to use risk management tools such as Component VaR and Best Hedge calculated with and without distributional assumptions

• Be familiar with the concept and implementation of stress testing in credit risk portfolios

• Be able to determine appropriare interest charges for bank loans

 

Outline content

• Economic and Regulatory capital
• Credit scoring models: Altman Z-score and refinements
• Credit ratings: designing and implementing effective internal credit rating systems.
• Recovery risk: estimating "loss given default"
• Credit Loss Distribution: Expected and Unexpected Loss
• A Rating-based Credit Risk Model: CreditMetrics
• An Equity-based Credit Risk Model: KMV
• Credit Risk Management Tools
• Stress Testing
• Loan Pricing

Module convenor: Dr Emese Lazar20 credits

This module provides an understanding of the Value-at-Risk (VaR) framework for market risk assessment and control. The module has a significant practical component with computer-based workshops that are designed to support the lecture material. By the end of the module, it is expected that students will:

• Understand the latest developments in banking regulations that are the main driving force behind changes in our approaches to risk measurement

• Outline the foundations of market risk analysis and the basic models for assessing market risk

• Describe the market risk measurement techniques that are used daily in the front and middle offices of banks; particular emphasis is placed on the appraisal of the covariance matrices that are used to measure the market risk of portfolios

• Be able to build various Value-at-Risk (VaR) models for market risk for international portfolios of equities, FX, interest rate products, commodities, derivatives etc.

Outline content

• The characteristics of markets and market risk

• Capital requirements & RAPM
• Value at Risk models
• Advanced VaR models
• Applications to Equities
• Applications to Foreign exchange
• Applications to Interest rate products
• Applications to Derivatives
• Applications to Fund management, banking & non-financial firms

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Dr Nicholas Zhiyao Chen20 credits

This module is designed for advanced Master’s students and doctoral students. It has a very high technical content. It aims to equip the students with the foundations of theoretical asset pricing and with the relevant skills for performing empirical tests. Additionally, a few important corporate finance topics will be covered in the format of student presentations. The objective of the module is to prepare students to become independent and quality researchers.

Available learning modes:

• Full time
• Flexible learning

Module convenor: Dr Andy Bevan20 credits

The main aims of the module are to identify the fundamental determinants of short- and long-term interest rates, learn how to monitor developments in interest rate markets and employ commonly used trading strategies. The course will be based around the work of a research department in an investment bank when formulating strategy for its proprietary trading desk and hedge fund customers. Each lecture will provide: (1) a concise outline of economic theory, (2) practical examples of events in markets from recent years, and (3) identification of trading strategies. Seminars will focus on market pricing conventions and worked examples. By the end of the module it is expected that students will:

• Be aware of the main aspects of the economic theories of the determination of interest rates and corporate credit spreads
• Be capable of analyzing economic situations to determine the likely implication for various assets in the interest rate markets
• Be familiar with the principal strategies used in trading short rates, long rates and credit spreads

Outline content

• Flow of Funds and the Economics of Interest Rates
• Monitoring Central Banks and the Determination of Short Rates
• Pricing and Trading of Short Rate Instruments
• Fundamentals of Bond Pricing, Duration and Convexity
• Fitting the Yield Curve and Theories of the Term Structure
• Trading of Bonds, Bond Forwards and Futures
• Pricing and Trading of Interest Rate Swaps
• Default Risk and Corporate Bond Spreads
• Corporate Bond Spreads Through the Business Cycle
• Pricing and Trading of Credit Default Swaps

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Dr Konstantina Kappou10 credits

This module aims to provide students with a detailed knowledge of the Commodity Derivatives Markets. It examines the aspects of pricing and trading physical derivatives, with emphasis on the Energy and Shipping (Freight) sectors. The course is designed using real trading examples, stimulating students, who want to follow a Sales and Trading Career in Investment Banking, to approach derivatives pricing from first principles.

Outline: Introduction to Commodity Markets (History and Evolution, Energy Products, Base Metals, Soft Commodities), Main Market Players and the Forward Curve (Basis Risk, Commodity Futures and Options, Exchanges and OTC markets), Pricing of Commodity Derivatives (Swaps, Options and Structured Trades), The Oil Market and its Mechanisms (OPEC and DOE, Crude Supply and Demand, Inventories, Crude Products and Crack Spreads, Refineries and Margins, Main Energy Derivatives strategies), The Freight Market and its Mechanisms (The Baltic Exchange and the Shipping Industry, Forward Freight Agreements, Trading Freight Derivatives)

Available learning modes:

• Full time
• Flexible learning

Module convenor: Dr Alfonso Dufour20 credits

Building on the material introduced in Quantitative Methods for Finance, this module examines a number of additional techniques that are relevant for financial applications, and in particular for modelling and forecasting financial time series. An introduction to the methods of maximum likelihood estimation and Generalised Method of Moments will be given, and emphasis will be placed on modelling high-frequency data. Case studies from the academic finance literature are employed to demonstrate potential uses of each approach. Extensive use is also made of financial econometrics software to demonstrate how the techniques are applied in practice. By the end of the module, it is expected that the student will be able to

• Describe, estimate and evaluate a number of different approaches for modeling financial data with particular emphasis on trade data

• Determine the appropriate class of models to address a particular problem in empirical finance

• Compare and contrast a number of methods for modeling and forecasting the volatility of financial time series

• Write programs in a statistical software package in order to achieve particular tasks that cannot be accomplished using built-in functions

• Comprehend and critically evaluate the use of econometrics in the published academic finance literature

 

Outline content

• Stylised characteristics of financial data
• Ordinary Least Squares (OLS)
• Relaxing the OLS assumptions
• Simultaneous equations models
• Vector autoregressive models
• Cointegration
• Maximum Likelihood estimation method
• Panel data analysis
• Simulations methods in econometrics and finance

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Professor William Ziemba10 credits

Outline content:

• The historical record of stocks, bonds, currencies, gold, etc over the past 100+ years and in the key countries, the US and China: Measuring worldwide risk attitudes, An example of investing in other (non exchange traded) equity assets: the Yale University multi-strategy endowment approach, Prediction markets
• Incentives and risk taking behaviour in hedge funds: the evaluation of regular hedge funds, Can you beat the stock market: the various camps according to WTZ, Arbitrage and risk arbitrage.
• How to evaluate great investors: the downside symmetric Sharpe ratio, Can we predict stock market crashes? The bond-stock earnings yield model
• An attempt to understand the 2007-2009 crash and future scenarios for the recovery, Why did the market crash? Excess derivatives, excess leveraging, excess real estate prices fueled by reckless lending, Why the markets were rallying starting in March 2009 while the economy is still so weak.
• An assessment of the performance and predictive ability of various stock market anomalies 1993-2010 and 2004-2010: what worked and what did not.

Available learning modes:

• Full time

10 credits

International Securities Markets applies general valuation risk assessment methods to: fixed income securities, derivatives and markets. It describes the basic characteristics of each fixed-income security, cash and underlying, and develops practical strategies for finding its value and assessing its risk. It also considers how the markets for these securities are related and begins the task of showing how these relationships can be exploited for trading or investment. The analytical techniques introduced in this module are very applied to allow the successful candidate to apply directly to industry the more theoretical market valuation and risk models learned in other core modules taken in the first term.

Outline: FIxed income Analysis, Rates Trading and Hedging I, Rates Trading and Hedging II, Credit Analysis and Products I, Credit Analysis and Products II

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Dr Alfonso Dufour10 credits

The evolution of algorithmic trading, the proliferation of alternative trading platforms for trading the same security and the development of new products and assets with limited liquidity have contributed to raising the awareness of academics and traders on the importance of understanding and properly managing liquidity and execution risks. The objective of this course is to give students an introduction to liquidity and execution risks and an overview of the methods for managing these risks. The issues discussed in this course are important when developing trading strategies, valuing portfolios, liquidating large positions and transitioning assets to new investments. By the end of the module, it is expected that the student will be able to

• Explain the concepts of high frequency trading and algorithmic trading.
• Identify the characteristic elements of alternative algorithmic trade execution strategies
• Explain how to measure and manage trade execution risk and compute liquidity adjusted VaRs
• Solve simple trade execution problems and develop optimal execution strategies
• Understand the impact of recent regulatory changes on the market and market players

Outline content

• Introduction to the Security trading industry. Algorithmic Trading. Liquidity and liquidity risk. Liquidity suppliers.
• An example of algorithmic execution strategy: VWAP
• Transaction Cost Analysis (TCA). A framework for measuring and managing trade execution costs.
• Optimal execution strategies and liquidity adjusted value at risk of asset holdings
• Understanding, modeling and predicting execution risk
• MiFID and Reg-NMS. Recent regulatory trends and expected impacts on markets (competition, transparency and best execution)

 

Available learning modes:

• Full time
• Flexible learning

Module convenor: Mr Keith Dickinson10 credits

Managing Securities Operations is learning about and applying the concept of Operations Management to a financial institution. The course combines teaching about both the technical aspects of securities operations management and theoretical aspects of managing the risks inherent in such as business. It also serves as a base for those interested in further study in operational risk management. The analytics techniques taught in this course serve to synthesise much of the material being taught in the first term core topics of products, markets and institutions by learning how to apply them with regard to management theory. By the end of the module, the student will be able to: Understand how the various securities and derivatives taught in first term courses are traded and operationally managed in a financial institution; they will be introduced to Operations Management theory and how it is applied in a financial institution; they will learn and understand about the many operational market intermediaries that are essential for the investment and trading of securities; they will learn to create and manage securities databases; they will reinforce their knowledge about securities pricing and the various legal and market practices that impact settlement prices; they will understand the full “life cycle of a trade” and how it is managed at a senior management level. They will be introduced to the many and varied new regulatory frameworks being incorporated into the market (Basle II, etc.).

Outline content

• Essential operational management concepts

• The operational structure of a securities trading organisation
• The many types of securities transactions
• Understanding the trade life cycle - post trade
• Understanding the trade life cycles - funding
• Operational risks and how to manage them.

Available learning modes:

• Full time
• Flexible learning

Module convenor: Miss Deepa Govindarajan10 credits

This 10-credit optional module will provide and overview and understanding of purpose and operation of financial regulation, and the consequences of reform for different markets, including those of the students' home country. The module aims to deliver a broad insight into the key challenges for regulation within the financial sector and approaches to enhanced regulation of the financial sector. We will challenge current and past thinking on regulatory structures and concepts especially in the context of the recent financial crisis, which provides us with a rich source of information on the pros and cons of various options. We will examine the risks and issues different stakeholders confront when interacting with financial firms. Through these topics we will examine how financial firms should be regulated. In parallel we will set out the historical context and theoretical basis of regulation. We also look at the practicalities of regulation and the roles of various key regulators both domestically and internationally. This includes the Basel Committee, EBA, EIOPS and ESMA, national regulators (both in the developed and the developing world), sector regulators for banking, insurance, asset management and securities, the European Commission and others. We will then evaluate how regulation helps address risk and ensure stakeholder interests are given due protection. We will also study the impact on the compliance and risk management functions within financial firms. One of the key aims is to provide students with the broader regulatory skills and knowledge required to work within the financial services industry. We will also aim to gain an understanding of the role and working of risk management, compliance, internal audit and allied functions in financial firms. The module will include a discussion of:

• Regulatory Objectives
• Structure and nature of regulators - the theory of regulation
• Regulatory context - the crisis
• Regulatory strategies - what are we trying to legislate for
• Regulating risk - Prudential and conduct of business issues
• Governance and culture
• Systems and control
• Regulation today and regulatory objectives
• Compliance, risk management, audit and finance - roles and responsibilities
• Can regulators rely on these functions - how to test their efficacy
• The Challenges ahead

  Key regulatory initiatives studied include:

• Dodd-Frank
• Basel 2 and beyond
• Solvency 2
• UCITS
• MiFID
• PSD

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Professor Charles Sutcliffe20 credits

This is an applied course with little quantitative content. It deals with one of the most important group of institutional investors – pension schemes, focusing on occupational pension schemes. Pensions are in a state of crisis and change, and have become the subject of popular debate and controversy. They employ fund managers to invest many £trillions on their behalf. Developing countries, such as China and India, have the potential for an enormous expansion of their pension schemes. Therefore the assets under management of pension schemes globally are likely to increase considerably. The investment of pension funds requires an understanding of how pension schemes work, which his hard to acquire as it has not been taught by educational establishments. This module will provide a detailed knowledge of a major group of institutional investors (pension schemes) and the real problems they face.

Available learning modes:

• Full time
• Flexible learning

Module convenor: Dr Ioannis Oikonomou20 credits

The module aims to build on the techniques for portfolio selection that will have been introduced in the Valuation of Securities module. The module will address both the theory and practice of portfolio management.

• The theoretical part will examine the issues involved in constructing an investment portfolio, evaluating the performance of that portfolio, and adjusting its composition through time to ensure that its performance remains optimal. It will also consider the use of derivatives in managing risk.

• The practical part will provide students with hands-on experience of constructing and managing an equity portfolio.

Outline content

• Diversification

• Financial instruments and markets
• Passive asset allocation
• Active portfolio management
• Equity analysis
• Bond analysis
• Derivatives for fund management (forwards/futures/swaps/options)
• Hedging/ portfolio insurance
• Investment strategies/ Performance measurement
• Fund management in practice

Available learning modes:

• Full time
• Flexible learning
• Distance learning

Module convenor: Volker Nienhaus10 credits

Provides students with the opportunity to study the juristic basis of Islamic finance, and the nominate contracts that are set out in Islamic commercial jurisprudence (the Fiqh al Muamalat). Students will develop an understanding of the principles of Islamic jurisprudence and its nominate contracts, and how these are applied in Shari’ah compliant financial products and services.

Outline content:

• The origins of Islamic commercial jurisprudence
• Prohibitions to be respected in order for Islamic contracts to be valid:
• Avoidance of riba (pure return on money), maysir (speculation), and gharar (uncertainty or ambiguity of subject matter)
• The frequently used nominate contracts
• Overview of Islamic financial products and their basis in nominate contracts (see Module 255)
• ShariÂ’ah governance of Islamic financial institutions
• The IFSB Guidelines on ShariÂ’ah governance

  Available learning modes:

• Full Time

Available learning modes:

• Full time

Module convenor: Professor Charles Sutcliffe20 credits

The aim of the research project is to allow students to define and execute a piece of research in finance on a topic of their choice, with direction from an academic supervisor and with assistance from a doctoral student support supervisor. The Learning Outcomes of this module are:

• Successful completion of the research project requires students to define and execute a piece of research in finance.
• They will be required to seek out and to critically evaluate published literature in a particular field.
• Students will improve their report-writing skills, learning how to structure their study, and how to place their findings in the wider context

 

Available learning modes:

• Full time
• Flexible learning
• Distance learning