Finance is the study of how people allocate scarce resources over time. In this financial economics, we will study three analytical "pillars" to finance: optimization over time, asset valuation, and risk management. The main topics includes financial markets and institutions, financial statements, compounding, discounted cash flow decision rules, life-cycle financial planning and investments, capital budgeting, valuations of common stock.
Overview
Syllabus
- 1. Financial Economics
- 1.1 Defining Finance
- 1.2 Financial Decisions of Households and Firms
- 1.3 Forms of Business Organization
- 2. Financial Markets and Institutions
- 2.1 Functions of the Financial System
- 2.2 Financial Markets
- 2.3 Financial Market Rates
- 2.4 Financial Intermediaries
- 3. Managing Financial Health and Performance
- 3.1 The Balance Sheet & Income Statement
- 3.2 The Cash Flow Statement
- 3.3 Analysis Using Financial Ratios
- 3.4 Constructing a Financial Planning Model
- 4. Allocating Resources Over Time
- 4.1 Compounding
- 4.2 The Frequency of Compounding
- 4.3 Present Value and Discounting
- 4.4 Alternative Discounted Cash Flow Decision Rules
- 4.5 Multiple Cash Flows
- 4.6 Annuities
- 4.7 Perpetual Annuities
- 4.8 Loan Amortization
- 4.9 Exchange Rates and Time Value of Money
- 4.10 Inflation and Discounted Cash Flow Analysis
- 5. Household Saving and Investment Decisions
- 5.1 A Life-Cycle Model of Saving
- 5.2 Intertemporal Budget Constraint
- 5.3 Taking Account of Social Security
- 5.4 Should You Invest in a Professional Degree?
- 5.5 Should You Buy or Rent?
- 6. The Analysis of Investment Projects
- 6.1 The Net Present Value Investment Rule
- 6.2 Estimating a Project's Cash Flows
- 6.3 Cost of Capital
- 6.4 Sensitivity Analysis Using Spreadsheets
- 6.5 Analyzing Cost-Reducing Projects
- 6.6 Other Projects Analyses
- 7. Principles of Market Valuation
- 7.1 Value Maximization and Financial Decisions
- 7.2 The Law of One Price and Arbitrage
- 7.3 The Prices of Financial Assets and Interest Rates
- 7.4 Valuation Using Comparables and Valuation Model
- 8. Valuation of Known Cash Flows: Bonds
- 8.1 Using Present Value Factors to Value Known Cash Flows
- 8.2 The Basic Building Blocks: Pure Discount Bonds
- 8.3 Coupon Bonds, Current Yield, and Yield to Maturity
- 8.4 Why Yields for the Same Maturity May Differ
- 8.5 The Behavior of Bond Prices over Time
- 9. Valuation of Common Stocks
- 9.1 The Discounted Dividend Model
- 9.2 Earnings and Investment Opportunities
- 9.3 Does Dividend Policy Affect Shareholder Wealth?
- 10. Principle of Risk Management
- 10.1 What Is Risk?
- 10.2 Risk and Economic Decisions
- 10.3 The Risk-Management Process
- 10.4 The Three Dimensions of Risk Transfer
- 10.5 Risk Transfer and Economic Efficiency
- 10.6 Portfolio Theory and Probability Distribution of Returns
- Final exam
Taught by
Jun Zhao, Song Xu, JianFeng Li, Wei Wang, and XiaoMin Zhang
