MBA Finance Electives 2003-2004


Advanced Derivatives
This course builds on the topics from Introductory Derivatives. Emp...
preservation and growth of wealth. The emphasis of this course will be on the decisions
that must be made by, and for, the...
The course best suits those aiming for a finance career in investment management,
corporate financial management and finan...
Several topics will be covered in this course, including 1) interest rates, inflation, yield
curves and their application,...
alternatives available to corporations stressing both theoretical as well as practical
considerations. It is expected that...
This course provides an introduction to the primary instruments of the derivative
securities market (options, futures and ...
scheduled. We plan to have several prominent bankers and corporate executives as
outside speakers. If needed, some of the ...
corporations. Many managers will either directly or indirectly face the challenges
brought on by these changes in corporat...
________________________________________________________________________
Real Estate Development Process
This course is de...
Prerequisites: none
*This course is offered only to first-year MBA students in the Real Estate Concentration.
____________...
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  1. 1. MBA Finance Electives 2003-2004 Advanced Derivatives This course builds on the topics from Introductory Derivatives. Emphasis will be placed on real-world applications of theoretical (or conceptual) material developed in class. Although the pricing of derivative securities and the applications of such securities to portfolio and risk management is mathematical by nature, most of the math in the course is algebra-based. Certain concepts in the course draw on the mathematical principles of calculus, but calculus is not a requirement for the course There will be several topics covered, including duration-based fixed income portfolio management; fixed income pricing and risk management using interest rate futures; fixed income pricing and risk management using swaps, pricing and risk management using interest-dependent financial claims with option features; the use of exchange-traded options in asset allocation; practical LP-based option portfolio selection; the use of option pricing theory to price corporate debt; and real options. The course will incorporate both lectures and student discussions to cover the various topics. Students will also prepare several applications-based projects as a basis for class discussion. Students interested in portfolio management, derivatives trading, commercial banking, investment banking and industry finance are encouraged to take this course. Prerequisites: Intro to derivatives – Finance 285 ________________________________________________________________________ Applied Corporate Finance In this course, we will apply the theory of corporate finance to analyze a set of case studies. The purpose of this course is to learn how to resolve real corporate finance problems with the help of theory, analysis and judgment in the context of a corporation’s business strategy. The case studies for this course are from HBS, Darden and INSEAD. Students are expected to form study groups with four members to analyze the assigned cases for class discussions. This course will cover several topics, including capital budgeting, cost of capital, raising capital, SEOs, rights issues, capital structure, dividend policy, financial innovations, applications of option pricing to corporate finance and real options. Students interested in investment banking and industry finance are encouraged to take this course. Prerequisites: core finance courses *This course is only open to second-year MBA students ________________________________________________________________________ Applied Investment Management Investment management is the process of investing in financial securities for the
  2. 2. preservation and growth of wealth. The emphasis of this course will be on the decisions that must be made by, and for, the ultimate investor, and the analytic tools and empirical evidence that can help inform such decisions. The objective of this course is two-fold: first, to provide financial analysts with the analytical skills needed to aid such investors; and second, to help individual investors utilize and evaluate the services offered by analysts. Traditionally, investment courses have tended to focus on the investment process of institutional investors building portfolios of securities. The dramatic change in computational and communication costs over the last decade makes such techniques accessible to a larger set of investors today. In addition, there is a worldwide trend to give individuals more control over the investment of funds to cover retirement expenses. The combination of these two trends makes it imperative that individuals understand how to make investment decisions rationally. The practical application of the principles and the techniques of Investment Management will be covered by the operations of Kenan-Flagler Financial Planners (KFFP). Each student in the course will be one of the financial planners (analyst) in KFFP. The instructor will function as the research department. Each student will complete a financial plan for a client (investor). Topics covered include: 1) the behavior of security prices; 2) objectives for short-term and long-term investing; 3) diversification; 4) constructing optimal portfolios; 5) modeling and estimating risk-reward tradeoffs; 6) active versus passive strategies; 7) evaluating the performance of managed portfolios; and 8) valuation models. Various concepts and approaches are subjected to real-world data. Descriptive and institutional materials in the textbook are left for students to read on their own. We will aim to provide students with a lasting conceptual framework in which to review the investment process and to analyze future ideas and changes in the investment environment. Prerequisites: permission of professor. *This course is limited to second-year MBA students. ________________________________________________________________________ Bond and Currency Markets This course provides an integrated framework that seeks to understand bonds and currencies as important asset classes; analyze the investment strategies of these asset classes; and advance the strategic goals of firms. The course surveys the operating characteristics of bond and currency markets including the principal market participants, the instruments traded, pricing and trading strategies, and creative uses of the instruments in both investment and corporate value creation. Specific topics will be covered, including the coverage of currency markets and global fixed-income markets; bonds, swaps and spot/forward FX; basic fixed-income analytical tools, investment and risk management strategies; and innovative structures for firms to take strategic opportunities and lower financing costs.
  3. 3. The course best suits those aiming for a finance career in investment management, corporate financial management and financial risk management. Those who pursue a consulting career may also find this course helpful. Instructional format consists of roughly tow-thirds lecture and one-third case-based discussion. Prerequisites: none *This course is not computer-supported ________________________________________________________________________ Corporate Governance Corporate Governance deals with the various mechanisms available to investors that guarantee that they receive a return on their investments. How do shareholders and bondholders make sure that the manager engages in activities that are in investor’s interest and not in the manager’s interest? How easy is it to identify and punish bad managers? In this course, we will analyze these questions both theoretically and realistically through several case studies and examples. Some of the main topics covered in the course include the ways in which venture capitalists monitor projects, the role of the board of directors in mature firms, poison pills in takeover markets, institutional investors, bankruptcy proceedings and compensation contracts. Students interested in investment banking, corporate strategy, money management, corporate finance and equity research are encouraged to take this course. To understand the material covered in the course, students must have prior exposure to the basics of agency theory, takeover theory and capital structure theory beyond that covered in BA280. Prerequisites: 280A, 280B, 280C or with permission of instructor. *This course is limited to second-year MBA students. *Course is not computer-supported. ________________________________________________________________________ Financial Management Decisions and Applications The course is designed as a follow-up to the MBA first-year core finance courses for students desiring additional work on applied topics in corporate finance. It is targeted specifically at students planning careers in operations, marketing, strategy and consulting, and at those concentrating in finance who plan careers in industry finance. The course includes material only lightly covered in the first year. It assumes a good grounding in first-year basics and is not a remedial course in first-year finance. The perspective and emphasis of the course will be managerial, that is, taught from the perspective of company management rather than financial economics. Although technical topics such as derivatives, valuation, and capital budgeting will be covered, the course will not provide in-depth technical expertise for specialists on these or other topics. Course format will be lecture/discussion, with cases, technical notes and applied articles as the primary instructional vehicles. The criterion for course design will be importance and usefulness of the material to practicing managers.
  4. 4. Several topics will be covered in this course, including 1) interest rates, inflation, yield curves and their application, and stock market efficiency; 2) valuation of companies and measurement of value creation; 3) development of financial models and value-creating strategies; 4) risk management derivatives and risk management failures; 5) currencies, capital flows, financial market parity relationships and currency risks; 6) management of currency risks; and 7) investments and finance across international borders. Prerequisites: BA 280A and 280B (first-year core finance courses) *This course is limited to second-year MBA students *This course is not computer-supported ________________________________________________________________________ Financial Modeling The objective of this course is to develop skills in designing and constructing financial models for analyzing a variety of decision problems facing today’s financial managers and professionals. We will use a discounted cash flow valuation approach in analyzing decisions about the courses of actions for a company. A structural approach will also be used for valuation by incorporating all operational and financial aspects of the firm into an integrated pro-forma statement. We will focus on how to analyze historical performance, forecast free cash flows, estimate discount rates, determine a terminal value, identify other sources of value and interpret results in a dynamic setting. This course will deal with the inherent uncertainty in forward-looking models with Monte Carlo simulation techniques. This approach is different than traditional models which tend to be static. They are very limited in analyzing and incorporating interactions between model drivers. With new spreadsheet tools available to us, we will now be able to build complex models that incorporate uncertainty and interaction among many variables at once. In addition, we will be able to introduce and use real options as a primary tool in valuing flexibility present in many cases. This is a finance course and proficiency in computer spreadsheet use, although necessary, is not the primary basis for determining how well students have performed in the course. Substantial weight is attached to the decision making process via the application of the basic tools of financial analysis to practical financial problems. Students will learn how to use a variety of spreadsheet tools and techniques, such as financial and statistical command functions, what-if scenarios, one-and two-way input tables, pivot tables, probability analysis, optimization, Monte Carlo simulations, regression analysis, and time series analysis in this course. We will build and solve simple, then complex models in class. The basic approach is to learn by doing. This course is limited to second-year MBA students and is computer-supported. ________________________________________________________________________ Financing Deals and Strategic Transactions This course provides a real world perspective on how corporate financing decisions are made. The course provides a market-based view on the fixed income and equity financing
  5. 5. alternatives available to corporations stressing both theoretical as well as practical considerations. It is expected that students have had prior exposure to capital structure theory and applications beyond that covered in BA280. The course spends a significant component of time describing execution alternatives and strategies and how companies balance the need for optimal capital structure and financing arrangements with the practical realities and constraints imposed by capital markets. Significant time is also spent describing recent capital market innovations that help companies overcome capital market constraints. The course emphasizes that successful financial planning has to occur in conjunction with a company’s overall corporate strategy and that a successful corporate strategy in turn requires the ability to fund that strategy. The course describes how companies evaluate alternative corporate strategies such as acquisitions, M&A, spin-offs, and divestitures and the fundamental role that practical constraints play in these deliberations. Attention is paid to the specific issues involved in funding an acquisition strategy. The course concludes with a discussion of recent trends in corporate governance and their impact on companies’ financing alternatives. The course does not use prepackaged case studies. Instead significant time is spent on real-time corporate situations to illustrate the impact of current market conditions on financial structure and alternatives. Student presentations are expected and constitute an integral part of the course. The course involves minimal guest speakers. There is no textbook and assigned readings are drawn primarily from non-academic sources such as trade and/or investment banking publications. Written exams do not constitute a heavy component of the grade, but active class participation is expected. Prerequisites: none *This course is limited to second-year MBA students ________________________________________________________________________ Fundamental Principles of Corporate Finance Fundamental Principles of Corporate Finance is a more advanced course in corporate finance theory and policy. The aim of the course is to rigorously analyze the major issues affecting the financial policy of a modern corporation, such as the choice of its capital structure, dividend policy, share issuance and repurchase, and corporate governance system. We will critically discuss costs and benefits of the strategies available to a firm’s top management to address these issues effectively. The course will also examine private equity and venture capital, and the process of raising capital through IPOs and SEOs. The course will conclude with a discussion of the role of corporate financial risk management. Classroom presentation will be mainly theoretical, but will illustrate the main concepts with examples drawn from the real world. Exposition will be analytical, and a working knowledge of basic mathematics and statistics is assumed. Prerequisites: BA 280A, BA 280B *This course is limited to first-year students ________________________________________________________________________ Introduction to Derivatives
  6. 6. This course provides an introduction to the primary instruments of the derivative securities market (options, futures and swaps) and the applications of these securities to the management of stock portfolios, fixed-income portfolios, and other financial and business risks. Emphasis will be placed on real-world applications of theoretical, or conceptual material developed in class. Although the pricing of derivative securities and the applications of such securities to portfolio and risk management is mathematical by nature, most of the math in the course is algebra-based. We will cover several topics in this course, including an introduction to option markets; no-arbitrage-based option pricing relationships; an introduction to binomial option pricing; advanced binomial pricing; the Black-Scholes model; practical issues with Black-Scholes model; using the Black-Scholes model in portfolio management; option investing from a risk-return perspective; an introduction to futures and forward markets; futures and forward pricing; hedging with futures; and swap markets. This course will incorporate lectures and student discussions to cover the varying topics. Students can expect to prepare several application-based projects as a basis for class discussion. Students interested in portfolio management, derivatives trading, commercial banking, investment banking and industry finance are encouraged to take this course. Pre-requisite: BA 280 *This course is open to first and second-year MBA students ________________________________________________________________________ Investment Banking This course is designed to prepare first-year MBA students for investment banking internships. The main focus of the class is on financial modeling. The first two classes consist mostly of preparation for the financial modeling workshops (led by the class Teaching Assistants), and last for approximately three hours. There are six four-hour workshop sessions. These workshops are led by Scott Rostan, founder and CEO of Teaching the Street, a company that provides financial modeling instruction to a number of major investment banks. Areas to be covered are financial analysis and projections, comparables, valuation methods, etc. We will learn about topics including income statements, balance sheets and cash flow statement projections; depreciation, amortization and working capital schedules; public company comparables analysis; discounted flow analysis and valuation; and recent events concerning investment banking. In feedback from the major investment banks, we are consistently told that financial modeling is the most critical area to master before IB internships. The secondary emphasis of this course will be on general knowledge of investment banking and what it takes to succeed as an IB professional. The class will meet for one hour on those days when the Rostan-led workshops are not
  7. 7. scheduled. We plan to have several prominent bankers and corporate executives as outside speakers. If needed, some of the regular classes are scheduled as financial modeling review/practice sessions. The course is graded pass/fail. The primary target for this course is first-year MBAs with IB internships. The course has also proven helpful to MBAs with corporate finance internships or jobs. Prerequisites: none *First-year MBAs are given preference for admission to this class but second-year MBAs are eligible. *This course is computer-supported, e.g. using computer simulation, special databases, and other high-tech components. ________________________________________________________________________ Investments Investment management is the process of investing in financial securities for the preservation and growth of wealth. The emphasis of this course will be on the decisions that must be made by, and for, the ultimate investor, and the analytic tools and empirical evidence that can help inform such decisions. This course will provide a rigorous and integrated framework for portfolio choice and risk investment. Traditionally, investment courses have tended to focus on the investment process of institutional investors building portfolios of securities. The dramatic change in computational and communication costs over the last decade make such techniques accessible to a larger set of investors today. In addition, there is a worldwide trend to give individuals more control over the investment of funds to cover retirement expenses. The combination of these two trends makes it imperative that individuals understand how to make investment decisions rationally. The course objective is therefore twofold, providing financial analysts with the analytical skills needed to aid such investors, and helping individual investors utilize and evaluate the services offered by analysts. The practical application of the principles and the techniques of Investment Management will be covered by the operations of Kenan-Flagler Financial Planners (KFFP). Each student in the course will be one of the financial planners (analysts) in KFFP. The instructor will function as the research department. Students will complete a financial plan for a client (investor). Topics covered include the behavior of security prices, objectives for short-term and long-term investing, diversification, construction of optimal portfolios, models and estimations for risk-reward tradeoffs, active versus passive strategies, evaluation of the performance of managed portfolios, and valuation models. Prerequisites: none *This course is open to first and second-year MBA students. ________________________________________________________________________ Mergers, Acquisitions and Corporate Restructuring Mergers, acquisitions and corporate restructuring have a dramatic impact on most
  8. 8. corporations. Many managers will either directly or indirectly face the challenges brought on by these changes in corporate structure. These mergers that induce change provide an opportunity for gaining insight into key corporate issues. The objective of this course is to learn the financial techniques to analyze the valuation and structuring of corporate mergers and acquisitions, with an application of financial theory to solve a set of case studies in strategic decision areas. Students will form study groups to examine and analyze assigned cases for class discussions. Students are expected to be familiar with the finance theory from previous finance courses. Prerequisites: core Finance courses *This course is limited to second-year MBA students. ________________________________________________________________________ Real Estate and Land Use Real Estate and Land Use explores issues facing investors and developers in both land use and taxation. Detailed discussion is provided on a wide variety of tax-related issues such as ownership structure, income and expense definitions, and tax implications of selected disposition strategies. Students also are introduced to issues of land-use control (planning and smart growth, state growth management and subdivision regulation and zoning) and techniques for effectively managing the land-use process. *Prerequisites: Finance 214, 215, 216, 217 *This course is limited to second year Real Estate Concentrations or by permission of instructor. ________________________________________________________________________ Real Estate Capital Markets Real Estate Capital Markets focuses on the techniques used to analyze, finance and structure commercial real estate transactions. This course also examines the role of capital markets in facilitating development and investment in commercial real estate. Topics include an overview of the real estate space, capital markets and valuation; investment analysis for real estate equity investment, including financial structure, taxation and valuation using real-option methodology; primary and secondary commercial mortgage markets (CMBS); and analysis of publicly traded real estate investment trusts (REITs). The course provides a decision-making framework that gives students an in-depth and intuitive understanding of real estate finance, real estate investment and the operation of real estate capital markets. Prerequisites: Finance 214 *This course is limited to second-year Real Estate Concentrations or by permission of instructor. *This course is not computer-supported.
  9. 9. ________________________________________________________________________ Real Estate Development Process This course is designed to analyze the real estate development process from the perspective of the equity participant. The course concentrates on the feasibility of real estate development (or re-development), which involves the identification and evaluation of critical assumptions related to the creation, construction and operation of an economically viable real estate product. The evaluation process relies on the extensive use of both real estate analytic tools and subjective inputs afforded by “hands on” analysis. The course is intended to provide the student with an analytical framework which can be applied to a wide variety of development projects. The emphasis of the course will be on risk management, both from the standpoint of cash flow analysis as well as the inherent uncertainties which arise from the development process. By dividing the real estate development process into focus areas, the student is expected to move from a concept of basic project cash solvency to the objective of attaining equity investment parameters, within the constraints imposed by all participants in the development process. Course objectives will be implemented through the completion of a comprehensive feasibility study on a proposed real estate development (or re-development) project. The course is both a practicum and lecture-discussion course. Each student will participate in a group that shall determine the feasibility of a real estate development project. Students will devote considerable time outside of class to their project. Students are expected to meet project deadlines, stay current on assigned readings and be prepared to discuss preassigned topics in class. Additionally, students are encouraged to stay current on development issues related to the course, by following local newspapers, Wall Street Journal, Barron's, etc. In addition to the instruction component of the course, each team will be required to present their findings to two advisory boards, which will be comprised of experts in the areas of development, investment, brokerage and leasing, lending, construction, and government relations. A component of the course grade will be provided by the advisory boards, and is to be based primarily upon the quality and thoroughness of both project reports and presentations. Prerequisites: BA 214, 215, 216 *This course is limited to second-year Real Estate Concentrations or by permission of instructor. ________________________________________________________________________ Real Estate Process The Real Estate Process introduces students to the basic concepts of real estate. This course provides a background on the concepts of urban and spatial economics, analysis of markets, valuation, law, development, capital markets and investment analysis. It also familiarizes students with the vocabulary of real estate and exposes them to real-world decision making processes through a series of case studies. Students in this course will build the foundation needed to be successful in the highly competitive summer internship job market.
  10. 10. Prerequisites: none *This course is offered only to first-year MBA students in the Real Estate Concentration. ________________________________________________________________________ Real Property Decisions This course is designed to provide students with the ability to both understand the issues which are currently important in the real estate industry, and to understand the process by which participants in the market make “micro-oriented” decisions related to these issues. In real estate markets, these decisions typically are made by individual investors, but the markets are becoming more dominated by institutions like life insurance companies, pension funds and other non-local investors. This creates some interesting relationships in a market in which local market information is critical, but often difficult to obtain. We will focus mainly on the intuition and inputs needed to make informed decisions at the individual asset level. These decisions require a background in real estate market analysis, law, valuation, finance, investment, management and a variety of other topics. This course is designed to be a survey course which covers a broad range of issues. We will not have time to delve too deeply into any of these areas. This course seeks to develop a real estate mindset through a focus on intuition and analysis. The coverage of these topics will provide a general background that can be applied to a broad range of real estate decisions. As with many things in the financial and capital markets, every real estate deal is a story and understanding which pieces of the story are important is a critical aspect of real estate decision making. A large part of the success in this course depends on student participation. We will analyze a number of cases during the semester and for each, student preparation is critical. After the class presentation of the case, students will write up a brief, two page summary of the case findings and what was covered in class. In the past, these case summaries have been useful in studying for the final exam. Students interested in developing, investing and financing real estate are encouraged to take this course. Prerequisites: MBA 214, 215, 216 *this course is offered only to second-year MBA students.

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