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Major Field Meeting Finance Department

Major Field Meeting Finance Department






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  • Interesting new developments in market making and trading systems with the growing importance of electronic communications networks (ECNS) such as Instinet, Island and Archipelago.
  • Fin I is taken by all Kellogg students, though it is possible to waive it
  • Practicum: The goal of the practicum is to give students the opportunity to analyze in depth and solve a real-world problem, which may be one suggested by a practitioner. The practicum will be offered in the Spring. Students may work in groups, under the direction of a faculty adviser. The project will culminate at the end of the quarter with a project presentation. The write-up for the project will require a statement of the problem, a description of the intellectual context, including a literature review, and a solution to the problem. Grading of the practicum will be based on the depth, analytic sophistication, and persuasiveness of the solution. Target Audience Investment Management/Trading Investment Banking Fast Track CFOs
  • NOTE: There are more courses than these – see Finance Dept. web page for full list of offerings
  • On the department website we offer some suggestions of courses which are particularly relevant for various career paths. For instance, for a career in money management we suggest the following courses. For other career paths you can find recommended course lists on the department website

Major Field Meeting Finance Department Major Field Meeting Finance Department Presentation Transcript

  • Major Field Meeting Finance Department Fall 2005
  • Agenda
    • Two Branches of Finance
      • Capital Markets / Investments
      • Corporate Finance
      • Careers Within Each Branch
    • [email_address]
      • Finance I
      • Finance Major
      • Analytical Finance Major
    • Classes
  • Capital Markets/Investments
    • Perspective: The investor’s portfolio
    • Key issues:
      • Expected rates of return
        • Beta and the Capital Asset Pricing Model
        • Multi-factor models
      • Measuring risk
        • Variances and covariances
        • Short-run risk, long-run risk
      • Security Pricing (stock, bonds, derivatives)
  • Corporate Finance
    • Perspective: The firm
    • Which projects to pick?
      • Capital Budgeting: Valuing investment projects
      • Net present value, real options
    • How to finance them?
      • Capital structure: Debt versus equity
      • Risk Management
    • What to do with the profits?
      • Dividend policy: Dividends/share repurchases/retained earnings
  • Careers
    • Capital Markets
    • Money Management (buy side)
      • Pension funds
      • Mutual funds
      • Hedge funds
    • Research, Sales and Trading (sell side)
      • Security analysis
      • Design securities to manage risks
      • Market making
    • Corporate Finance
    • Management
      • Finance Department
      • General Management
    • Investment/commercial banking
      • Raising Capital
      • Mergers and Acquisitions
      • Corporate Clients
    • Consulting
      • Strategic
      • Valuation
      • Managerial performance evaluation/compensation
    • Use the Alumni Network to find Kellogg grads:
    • http://kelloggalumni.northwestern.edu/Directory/
    • BasicSearch.asp
    • 160 at Merrill Lynch
    • 118 at Morgan Stanley
    • 94 at Lehman Brothers
    • 73 at Citigroup
    • 63 at Goldman, Sachs & Co.
    • 59 at JP Morgan Chase
    • 45 at HSBC
    • 38 at Deutsche Bank
  • Finance: Our Market Share at Kellogg
    • 19% of Graduates last year took jobs in finance
    • 26% of Interns last year took jobs in finance
    • Finance is one of the most popular majors at Kellogg (about tied with marketing and management and strategy).
    • And, we’re growing!
  • Finance @ Kellogg
  • Finance I (FINC430)
    • Which projects to pick?
      • Optimal investment decisions by firms
      • What cash flows does the project generate?
      • How to adjust for timing and uncertainty of cash flows?
    • Also a lot of useful techniques applicable to personal finance
    • We deal first with time...
      • basic discounting techniques, application to stock and bond valuation
      • capital budgeting under certainty
    • ...then with uncertainty:
      • asset pricing models
      • capital budgeting under uncertainty
      • market efficiency
  • Major Requirements
    • Finance Major
    • Analytical Finance Major
    • Both majors build on knowledge from FINC 430 (FIN I) and FINC 441 (FIN II)
  • Finance II (FINC 441) The role of the financial manager Fin I: Valuations and investment decisions Fin II: Dividend decisions Fin II: Financing decisions Fin II: Risk Management and Hedging Return rate should be appropriate Cash flows appropriately computed How much? What form? Identify costs and benefits of each financing instrument Choose the optimal mix Identify which risks should be hedged Find the appropriate instruments
  • Options for First Years
    • Option 1: Take Required Classes
      • Finance I and Finance II
      • or Finance I/II (Turbo) (combines Fin I and Fin II in one class)
    • Option 2:
      • Waive Finance I. Take Finance II.
    • Option 3:
      • Waive Finance I and Finance II
  • Finance Major
    • Finance I & Finance II (or FIN 440 (Turbo))
    • One capital market course from list “F”
    • 2 additional courses
  • Analytical Finance Major
    • Finance I & Finance II (or FIN 440 (Turbo))
    • 3 courses from List “A”
    • Derivative Markets I
    • Practicum
  • Classes
    • Capital Markets
      • Derivative Markets I F (A)
      • Derivative Markets II F A
      • Investments F A
      • Fixed Income Securities F A
      • International Finance F
      • Money Markets & the Fed F
      • Emerging Markets
      • Securitization
    • Corporate Finance
      • Financial Decisions A
      • Fin. Strategy & Taxes A
      • Entrepreneurial Finance
      • Venture Capital and Private Equity Investing
      • Real Options
      • Investment Banking
      • Corporate Restructuring
      • Mergers and Acquisitions
      • Security Analysis
      • Case Studies in Venture Investment and Management
    NOTE 1:You can target your courses to your career plans NOTE 2: It is not all math! Many courses use cases and analytical frameworks.
  • Practicum in Analytical Finance FINC-925
    • The focus of the course this year will be “Value Investing.”
    • First half: (a) formal lectures, (b) in class valuation discussions, (c) presentations by leading value investors.
    • Second half: Students will (i) design strategies for efficiently searching for value investing strategies, and (ii) identify an interesting value investing opportunity, in groups.
    • The course uses large data bases of returns data. You will learn to use STATA to analyze strategies.
    • Each group will make a final presentation on (i) and (ii). A couple of leading value investors to be present during the final presentation.
    • http://www.kellogg.northwestern.edu/faculty/jagannathan/ teaching/practicum/2005/index.htm
  • New Courses This Year
    • Investment Banking (Stowell, Winter 2006)
      • Focus on securities industry, Wall Street, LBO funds and hedge funds, various functions of I-banking
      • Sarbanes Oxley and the regulatory environment, exchanges
      • M&A strategies, valuation and defense
      • Corporate financing: IPOs, SEOs, debt and convertibles
    • Cases in Venture Investment and Management (Hochberg, Winter 2006)
      • Focus on evaluating early stage business opportunities and assessing VC investments
      • Learn how to make decisions in uncertain environments
      • Based on a series of cases
      • Will revolve around in-class case analysis with the venture capitalists and entrepreneurs involved in the cases
      • 5/5 ratings when taught at Cornell
  • More Information: Finance Department Web Page http://www.kellogg.northwestern.edu/finance/index.htm
    • Course recommendations by career
    • Course offerings, descriptions
    • Some course page links (see also Professors’ own web pages for links)
    • Professors
        • Email addresses
        • Biographical information
        • Research interests
  • Questions ?
  • Financial Decisions FINC-442
    • Uses case studies to enhance the student's understanding of managerial financial decision making, specifically investment and financing decisions.
    • Topics include short- and long-term financing, capital structure and dividend decisions, cost of capital, capital budgeting, firm valuation, financial and operational restructuring, and mergers and acquisitions .
    • The course is sufficiently general so as to be of interest to all students. It provides students with the opportunity to apply the concepts and theories developed in other finance courses.
    • At its most fundamental level, the course attempts to improve problem-solving skills: problem definition, gathering and organizing the relevant information, developing feasible alternative courses of action, evaluating alternative choices, and recommending and defending the best course of action.
  • Entrepreneurial Finance FINC-446
    • This course teaches students how to become an entrepreneur by focusing on financial aspects.
    • Topics include pro forma development and review, business valuation models, cash flow analysis and raising capital from private investors, venture capitalists and banks.
    • The course is taught using the case method process ("real life" case studies). Periodically, technical notes will be used and guests invited to augment subjects addressed. This is not a quantitative analysis course. Rather, it focuses on marketing, sales, management and strategic planning.
  • Venture Capital and Private Equity Investing FINC-445
    • This course teaches students about the venture capital and private equity industry from the primary perspective of the investor.
    • Topics include the structure of VC funds, the contracts between VCs and their investors, the contracts between VCs and entrepreneurs, valuation of deals, monitoring of investments, and exit strategies such as IPO / M&A
    • The course is taught using a combination of lectures, class discussions, and the case method process ("real life" case studies). Periodically, technical notes will be used and guests invited to augment subjects addressed. This is not a quantitative analysis course, though frameworks for thinking about valuation are provided.
  • International Finance INTL-470
    • Managing an international business or one exposed to global competition requires an understanding of international financial instruments, markets and institutions. This course seeks to provide students with a working knowledge of these issues.
    • Topics include the nature of foreign exchange risk; the determination of exchange rates and interest rates ; the management of foreign exchange risk with forwards, options and swaps; exchange rate forecasting; the anatomy of currency speculative attacks ; and the dynamics of the balance of payments with a focus on understanding international capital flows, country debt and exchange rate fluctuations.
  • Investments FINC-460
    • This course is a comprehensive study of investment theory from the perspective of plan sponsors and portfolio managers.
    • Emphasis is on optimal portfolio construction and portfolio performance evaluation using modern portfolio theory and asset-pricing models.
    • Topics include equity valuation , benchmark tracking , transactions costs , term structure of interest rates and bonds, use of derivatives in index fund management and hedge fund strategies.
  • Money Markets and the Fed FINC-451
    • This course covers two aspects of money markets : financial institutions , and financial instruments .
    • In the first half of the course, the linkages between the financial system and the macro-economy are studied including interest rate determination, the role of the Federal Reserve and the conduct of monetary policy.
    • The second half of the course provides an overview of the instruments of the money market: Federal Funds, Commercial Paper, Treasury Bills, etc. Basic valuation and hedging techniques in short term futures and swaps are also covered.
  • Derivatives Markets I, FINC-465
    • This course covers the use and pricing of forwards and futures, swaps and options.
    • Specific topics include strategies for speculation and risk management , no-arbitrage pricing for forward contracts, the binomial and Black-Scholes option pricing models and applications of pricing models in other contexts.