Syllabus

Title
2049 Course II - Financial Management and Valuation
Instructors
Natalija Kostic, MSc (WU), Univ.Prof. Dr. Christian Wagner
Contact details
sbwl.finance@wu.ac.at
Type
VUE
Weekly hours
2
Language of instruction
Englisch
Registration
09/23/20 to 09/27/20
Registration via LPIS
Notes to the course
Subject(s) Bachelor Programs
Specialization in Business Administration Course II - Finance: Markets, Institutions and Instruments
Course II - Finance: Markets, Institutions and Instruments
Dates
Day Date Time Room
Thursday 12/03/20 03:30 PM - 05:45 PM Online-Einheit
Wednesday 12/09/20 03:45 PM - 06:00 PM Online-Einheit
Thursday 12/10/20 03:30 PM - 05:45 PM Online-Einheit
Wednesday 12/16/20 03:45 PM - 06:00 PM Online-Einheit
Thursday 12/17/20 03:30 PM - 05:45 PM Online-Einheit
Wednesday 12/23/20 03:45 PM - 06:00 PM Online-Einheit
Thursday 01/07/21 03:30 PM - 05:45 PM Online-Einheit
Wednesday 01/13/21 03:45 PM - 06:00 PM Online-Einheit
Thursday 01/14/21 03:30 PM - 05:45 PM Online-Einheit
Wednesday 01/20/21 03:45 PM - 06:00 PM Online-Einheit
Friday 01/29/21 08:00 AM - 09:30 AM Online-Einheit

On this page:

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Procedure for the course when limited activity on campus

The courses are held in distance mode, which means that all lecture units (lecture parts and interactive parts) take place online. The final exam is held online.

There are a few changes to the interactive part and its grading:

There will be no in-class tests in the interactive part, but only student presentations of mini-cases. The solutions of the mini-cases must be uploaded to Learn before each interactive unit. Students still need to check at least 70% of all mini-cases to pass the course. The grading of the interactive part will be based solely on the percentage of checked mini-cases if all presentations are correct or if they were never selected to present. A negative assessment of a student's presentation reduces the number of mini-cases checked by 20% (the basis being 100% of all mini-cases). For example: If a student checks 80% of the mini-cases and fails one presentation, the percentage of checked mini-cases will be reduced to 60% and will result in a fail.

Students with two negative assessments fail the course. If a student cannot present a mini-case due to technical problems (on his/her side), the grading is the same as for a negative assessment.

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Contents

Unit 1: Basics on derivatives (Ch. 7.1-7.5)

o Examples of derivatives

o Basics of derivatives pricing

o Binomial valuation

 

Unit 2: Options, part 1 (Ch. 8.1-8.5)

o Put-call parity

o Binomial pricing of European options

o Binomial pricing of American options

 

Unit 3: Options, part 2 (Ch. 8.6-8.10)

o Black-Scholes model

o Estimation of volatility

 

Unit 4: Valuation of risky projects, part 1(Ch. 11.1-11.5)

o Cost of capital as risk-adjusted discount rates using CAPM and APT

o Leverage effects

 

Unit 5: Valuation of risky projects, part 2 (Ch. 11.6-11.8, Ch.12.1-12.5)

o Certainty equivalent method

o Real options approach

o Understanding economic drivers of project values

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Learning outcomes

After completing the course, students will understand

· the notion of a certainty equivalent and to how use the risk-neutral pricing approach to value of future risky cashflows

· what derivatives are, how basic derivatives work and how they can be priced

· how to value risky projects using risk-adjusted discount rates

· how to value risky projects using the real options approach

· how to analyze the economic drivers behind a risky project’s value

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Attendance requirements

Participation is compulsory in the interactive part. There are grade related performance assessments in each interactive unit. There is absolutely no way to get these points if you are not present for the entire unit.

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Teaching/learning method(s)

The course is composed of two parts, a lecture part (5 units) and an interactive part (5 units). The lecture part is organized in only one big class for all students of the specialization. The interactive part is organized in small groups (max. 30 students). The five lecture units take place once a week. The five interactive units also take place once a week, but start one week after the first lecture unit.

The teaching approach of the lecture part is class room teaching type. In the interactive part a mix of methods is applied that includes presentations by the lecturer, class discussions, student presentations of numerical examples (“mini-cases”) and real-life case studies, in-class tests and a final exam.

Based on the introduction to the underlying concepts in the lecture part, students will have to prepare small numerical problems ("mini-cases") for the interactive part. E.g.: The concepts of the first lecture unit are applied and deepened in the first interactive unit, and so on. The mini-cases are either presented by students or evaluated by means of in-class tests and solutions are discussed with the lecturer. In addition, more involved case studies are discussed to provide more insight into industry applications.

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Assessment

The components for the grades are weighted as follows:

  • 40% lecture part (final exam)
  • 60% interactive part

Interactive part: Students have to prepare mini-cases for the weekly sessions and have to indicate (“check”) the mini-cases they can solve and are ready to present before each session. Each example will either be presented by a randomly selected student who checked this example or will be tested by means of an in-class test for all students. There will be two in-class tests. Students need to check at least 70% of all mini-cases to pass the course. The presentation of mini-cases will be evaluated. In order to pass the course, students need to be able to correctly solve the mini-cases they present. Note that indicating mini-cases you did not solve or cannot explain or present leads to a penalty (for details see Grading below). As many mini-cases can only be solved by using Excel or R students are required to bring their own notebooks to the interactive units to be able to solve in-class tests.

Grading: Formally, the evaluation is based on the total number of credits earned (>50% of credits needed to pass). The total number of credits C will be computed by C = 0.4*Clecture + 0.6*Cinteractive. Clecture denotes the percentage of credits earned at the final exam of the lecture part. Cinteractive denotes the percentage of credits earned for the interactive part and will be computed by Cinteractive = X*0.5*(Test1 + Test2). Testi denotes the percentage of credits earned at in-class test i. X equals one, if at least 70% of all mini-cases have been checked by the student in advance AND all presentations of solutions (if any) have been correct, and zero otherwise. In case that an incorrect solution is presented there will be an opportunity for compensation in the last unit of the interactive part.

The following grading scheme is applied:

Percentage Grade
[87.5%;100%]: 1 1
[75%;87.5%): 2 2
[62.5%;75%): 3 3
[50%;62.5%): 4 4
<50%: 5 5

 

square bracket [ ] = percentage is still included in the quantity
round bracket ( ) = percentage is no longer included in the quantity

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Readings
1 Author: Hillier, Grinblatt, Titman
Title:

Financial Markets and Corporate Strategy

Publisher: McGrawHill
Edition: 2nd European Edition
Content relevant for class examination: Yes
Recommendation: Strongly recommended (but no absolute necessity for purchase)
Type: Book
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Prerequisites for participation and waiting lists

Students need to be admitted to the specialization Finance: Markets, Institutions & Instruments to register for the course.

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Recommended previous knowledge and skills

basic knowledge of Excel or R, basics in Statistics

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Availability of lecturer(s)

christian.wagner@wu.ac.at

Last edited: 2021-01-26



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