Computational Finance

Athens University of Economics & Business<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Department of Accounting & Finance

Course:            Computational Finance - 6 ECTS

Lecturer:          Vasilios I. Sogiakas (e-mail: sogiav@aueb.gr)

Class:              Evelpidon str 1^st floor, Tuesday 15⁰⁰-18⁰⁰

Office:              Tuesday 18⁰⁰-20⁰⁰, AUEB main building, 1^st floor

Objective of the Course

This course refers to the function of structured financial products. The course consists of two parts, the theoretical and the econometric one. The objective is to understand some fundamental financial topics, such as financial management, capital structure, portfolio analysis, market risk, credit risk and furthermore to apply advanced econometric methodologies in order to explain empirically their implications.

Course Outline

Part A

1.         Financial Management

Capital & Money Markets, Time Value of Money, Present & Future Value, Rule of 72, Annuity, Compounding Frequency, Net Cash Flows, Investment Decisions, Net Present Value, Internal Rate of Return, Payback Period, Bonds, Shares, Loans, Leasing

2.         Corporate Finance

Financing Decisions, Leverage, Modigliani & Miller I & II

3.         Portfolio Analysis

Risk & Uncertainty, Portfolio construction, Utility function, Risk Premium, Mean-Variance: Markowitz model, Diversification, Feasible Set, Efficient Portfolio Frontier, Optimal Portfolio, Capital Market Line, Separation Theorem, Equilibrium models: Capital Asset Pricing Model, Systematic and Specific risk, Securities Market Line

4.         Derivatives Markets

Forward & Futures, Options, Strategies, Hedging

5.         Credit Risk

Rating Agencies, Expected Default losses on bonds, Probability of Default assuming no recovery, Hazard Rates, Recovery Rate, Structured Credit Risk models, Loss Given Default

Part B

1.         Volatility

2.         VaR

3.         Case Studies

References

1. Brealey, Myers & Allen, ‘Corporate Finance’, McGraw Hill

2. H. Levy & M. Sarnat, ‘Portfolio and Investment Selection: Theory and Practice’, Prentice Hall

3. Ph. Jorion, ‘Value at Risk: The New Benchmark for Controlling Derivatives Risk’, McGraw-Hill

4. Lawerence Galitz, ‘Financial Engineering: Tools and Techniques to Manage Financial Risk’, Financial Times (Pitman Publishing)

5. Journal reading

6. Handouts (V.Sogiakas)

Course Assessment

Examination and Case Study