LOYOLA MARYMOUNT UNIVERSITY

                   Summer Session II 2008

  MBAD/F 619: Risk Analysis and Financial Modeling...
Course Format
This course follows a lecture, hands-on and discussion format. Cases
and computer exercises will be assigned...
FINAL TOTAL POINTS   GRADE
  90 - 100             A
  80 - 89              B
  70 - 79              C
  60 - 69           ...
NOTES:

1.   Files containing preliminary case models, solutions, powerpoint
     slides and other spreadsheet examples wi...
COURSE OUTLINE

Week   Day Date                             Topic                     Text

 1     T    7/1    Introductio...
Week   Day Date                           Topic                           Readings

 4     T    7/22   Visual Basic for Ap...
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Course Description

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Course Description

  1. 1. LOYOLA MARYMOUNT UNIVERSITY Summer Session II 2008 MBAD/F 619: Risk Analysis and Financial Modeling Instructor: Linda Leon, Hilton #209, 338-7634, lleon@lmu.edu Time: Tuesday & Thursday 7:10 – 10:10 PM Office Hours: Tuesday 5:30 - 7:00 PM Thursday 5:30 - 7:00 PM Text: Benninga, Financial Modeling, MIT Press, 3rd edition, 2008. Prerequisites MBAA607, MBAA608, basic spreadsheet proficiency : Course Objectives 1. To develop analytical skills in modeling and decision-making with emphasis on financial applications involving uncertainty. 2. To introduce analytical financial models used in the spreadsheet environment. 3. To explore how decision support systems can help financial managers effectively deal with difficult and risky decisions. 4. To critically assess the risks of a financial spreadsheet model and apply appropriate spreadsheet management controls to mitigate the identified risks. Course Description This course introduces advanced quantitative model building skills for financial risk analysis. The course provides hands- on experience in the development of spreadsheet decision support simulation and forecasting models for applications in valuation, capital budgeting, option pricing, and portfolio management. IT control frameworks that can help organizations mitigate the risks of material errors in their financial spreadsheets will also be discussed.
  2. 2. Course Format This course follows a lecture, hands-on and discussion format. Cases and computer exercises will be assigned to complement the lecture material. Time will be set aside in class for analysis and discussion of the exercises. Students are expected to attend class, read the assigned case materials beforehand and participate in the class exercises and discussions. Course Requirements Two spreadsheet modeling cases will be assigned and graded. The spreadsheet model files will be turned in along with a typed paper which provides documentation of the model assumptions and design as well as an analysis of the decision problem based on the information generated with the user’s model. It is expected that all students will work independently on the cases; thus all models and recommendations should be unique. The second case will require data collection for input to the model. There will be two closed book, closed note exams. Both exams will require the use of the classroom laptop and will test the material covered in the previous five lectures. There will be short computer and small group class exercises as well as case discussions throughout the semester. Most of these materials will be collected and graded to determine the student’s class participation grade. Class attendance throughout the semester is important to receive full credit for your class participation score. The lowest class exercise score will be dropped from your grade calculation. Homework problems will also be assigned to reinforce the material taught in class. These problems are for the student's benefit and will not be collected or graded. Solutions and models will be provided so that students can check their work. Many of the problems will be included in class discussion. The final course grade will be distributed as follows: ASSIGNMENT WEIGHT Case 1: Capital Budgeting 18% Case 2: Option Pricing 18% Exam 1 25% Exam 2 25% Class Participation 14% TOTAL 100% All assignments will be graded on the scale 0-100. The point scores will then be combined according to the above weights at the end of the course and a letter grade will be assigned on the final total score according to the following guidelines:
  3. 3. FINAL TOTAL POINTS GRADE 90 - 100 A 80 - 89 B 70 - 79 C 60 - 69 C- Below 60 F
  4. 4. NOTES: 1. Files containing preliminary case models, solutions, powerpoint slides and other spreadsheet examples will be distributed to the class via the internet at http://myweb.lmu.edu/lleon/mbaf619 or on Blackboard. Students will be expected to submit their spreadsheet models using the drop box in Blackboard. Grade updates, discussion boards, spreadsheet articles and reference materials will also be available through Blackboard. 2. Cases will be accepted one class lecture late with a 10 point penalty. Arrangements due to special circumstances may be made with the instructors before the due date. 3. The exams must be taken at the assigned time. No makeup exam will be given without a valid documented medical reason and PRIOR authorization from the instructors. 5. Additional readings besides those listed in the course outline will be assigned as necessary. The scheduled course outline may also be adjusted as necessary. 6. Students with special needs who need reasonable modifications, special assistance, or accommodations in this course should promptly direct their request to the Disability Support Services Office. Any student who currently has a documented disability (physical, learning, or psychological) needing academic accommodations should contact the Disability Services Office (Daum Hall # 224, x84535) as early in the semester as possible. All discussions will remain confidential. Please visit www.lmu.edu/dss for additional information.
  5. 5. COURSE OUTLINE Week Day Date Topic Text 1 T 7/1 Introduction to Course Chpt. 3 & 35 Financial Modeling; Influence Charts; Spreadsheet Engineering; Sound Alive Case R 7/3 Financial Statement Modeling & Analysis Using Chpt. 30 Spreadsheets: Base-Case Analysis; What-if Analysis: Data Tables & Sensitivity Analysis Class Exercise 1 Case Discussion: Mark X Company 2 T 7/8 Simulation and Risk Analysis Handout 1; Class Exercise 2 Chpt. 34; Class Exercise 3 Homework R 7/10 Simulation Modeling: Handout 1 Input Distributions; Correlated Variables; Convergence and Parameter Interval Estimation Class Exercise 4 3 T 7/15 Financial Statement Models for Valuation Chpt. 4 Case Discussion: Computer Concepts Discussion of Case 1: Capital Budgeting R 7/17 * EXAM 1 *
  6. 6. Week Day Date Topic Readings 4 T 7/22 Visual Basic for Applications: Chpt. 36& 38  Using macros to create front and back end interfaces;  Creating user-defined input distribution functions R 7/24 Portfolio Models Chpt. 8-10, Class Exercise 5 12, 13 * CASE 1 DUE * F 7/25 ** LAST DAY TO WITHDRAW ** 5 T 7/29 Option Pricing: Chpt. 16, 18, 19, 21 and 23 Data Sources for Returns & Historical Volatility; Black-Scholes Model; Portfolio Insurance Exotic Options Class Exercise 6 Discussion of Case 2: Option Price Simulation R 7/31 Data Analysis for Financial Modeling: Handout 2 Analyzing Data; Forecasting Models; Eliciting Expert Opinions Class Exercise 7 6 T 8/5 Spreadsheet Management Articles on Class Exercise 8 Blackboard * CASE 2 DUE * R 8/7 * EXAM 2*

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