FINANCE (FNCE)
Professors: Sanjiv R. Das, Hoje Jo (Chair), Atulya Sarin, Hersh M. Shefrin, Meir Statman
Associate Professors: George Chacko, Robert J. Hendershott
Assistant Professors: Ye Cai, Seoyoung Kim, Carrie Pan
Glen Klimek Professor: Meir Statman
Mario L. Belotti Professor: Hersh M. Shefrin
Professors of Practice: Donald Davis, John Fay
Note: The following course is required of all MBA students. Please see Waiver Rules in the MBA Curriculum pages.
FNCE 451. Financial Management
Introduces the basic concepts and tools of finance. Reviews balance sheet and income statement categories. Emphasizes the time value of money, present value calculations, the opportunity cost of capital, valuation of simple securities, and evaluating investment opportunities in a capital budgeting system. Prerequisites: ACTG 300 and OMIS 353. (3 units)
Note: The following course is required of all MBA students, and is a prerequisite for all finance electives:
FNCE 455. Investments
Explores investment securities and markets; reviews valuation tools; analysis of stocks, bonds, and derivatives. Introduces constructing portfolios and controlling investment risks. Focuses on learning how to value assets given forecasts of future cash flows. Concentrates on the risk characteristics of different asset classes. Covers four broad areas: (a) bonds and other fixed income securities, (b) risk/return relationships, portfolio diversification, and equity factor models, (c) performance evaluation and security analysis, and (d) currencies, international interest rates, and derivatives. Combines the theoretical underpinnings of finance with real-world examples. Before taking the course, students should understand time value of money (discounting), capital budgeting, and evaluation of two-stock portfolios. Prerequisites: ECON 401 and FNCE 451. (3 units)
Note: The following courses are offered as electives and/or part of a concentration:
FNCE 457. International Financial Management
Studies financial issues specific to firms operating internationally. Examines the global financial environment, agency problems and corporate governance, international financial markets, exchange rate behavior, and corporate hedging decisions using currency options, currency futures, forward & cross-currency interest rate swaps by the multinational corporation (MNC) and understanding international parity relations. Prerequisite: FNCE 455. (3 units)
FNCE 459. Financial Markets and Institutions
Studies financial service companies such as commercial banks, investment banks, and insurance companies from the perspective of a corporate issuer. Reviews valuation tools. Emphasizes the analysis of a corporation’s funding alternatives under regulatory constraints, interest rate risk management, and the relation between financial institutions and financial markets. Other topics may include evolution of financial intermediaries and current developments in financial regulation. Prerequisite: FNCE 455. (3 units)
FNCE 460. Mergers, Acquisitions, and Corporate Restructuring
Examines corporate governance and corporate restructurings. Emphasizes how corporate ownership, control, and organizational structures affect firm value. Other topics include valuing merger candidates, agency theory, and takeover regulation. Places a heavy emphasis on case projects and/or class presentations. Prerequisite: FNCE 455. (3 units)
FNCE 462. Behavioral Investments
Explores behavioral paradigms as they relate to investments. Considers psychological biases that might affect investment behavior and examines empirical evidence that investors are subject to these biases. Explores the possibility that investor behavior affects asset prices. For example, do stocks held by a limited number of investors sell for less than stocks held by many investors? Before taking this course, students should have a solid understanding of the time value of money (discounting), capital budgeting, and the evaluation of multi-stock portfolios. Prerequisite: FNCE 455. (3 units)
FNCE 464. Real Estate Finance
Focuses on the risks, practices, and problems particular to financing and investing in real property. Teaches the concepts and techniques necessary to analyze financial decisions embedded in property development and investment. Prerequisite: FNCE 455. (3 units)
FNCE 474. Risk Management with Derivative Securities
Explores business risk management using futures, options, and swaps. Considers the institutional features of futures and option trading first, then introduces the theory of futures and option pricing. Applies these tools to the problems of hedging and cross-hedging commodity inventories in agriculture, metals, and other physical commodities. Covers managing financial risks such as foreign currency positions, general interest rate risk management, and the problem of portfolio immunization. Includes econometric estimation of option related metrics such as hedge ratios. Prerequisite: FNCE 455. (3 units)
FNCE 480. Emerging Company Finance
Covers financial topics most relevant to newly formed companies, with an emphasis on Silicon Valley-style startups that target large markets and raise outside capital. Includes topics on: (1) valuation, which is the course’s primary theme, underlying all of the topics covered; (2) evaluating business opportunities, which focuses on the underlying economic principles that differentiate large opportunities from small opportunities; (3) funding business opportunities, which covers both identifying a company’s needs and acquiring the capital to finance those needs; and (4) discussing how successful entrepreneurial ventures “exit.” Prerequisite: FNCE 455. (3 units)
FNCE 482. Business Valuation
Discusses implementing finance theory for valuation problems. Provides practical valuation tools for valuing a company and its securities. Covers valuation techniques including discounted cash-flow analysis, estimated cost of capital, market multiples, free-cash flow, and pro forma models. Prerequisite: FNCE 455. (3 units)
FNCE 484. Financial Engineering
Examines the design, valuation, and risk management of derivative securities (futures, options, etc.), including structured products. Includes topics on arbitrage theory, futures, equity options, bond options, credit derivatives, swaps, and currency derivatives. Mathematical modeling of derivatives, including implementation and applications in investments, corporate finance, and risk management. Prerequisite: FNCE 455. (3 units)
FNCE 486. Behavioral Corporate Finance
Identifies the key psychological obstacles to value maximizing behavior, along with steps that managers can take to mitigate their effects. Given that behavioral traps represent one of the most important obstacles to successfully implementing skills taught in traditional corporate finance courses, understanding these traps is absolutely essential. Teaches how to put the traditional tools of corporate finance to the best use, and mitigate the effects of psychological obstacles that reduce value. Prerequisite: FNCE 455. (3 units)
FNCE 488. Financial Instruments and Markets
Covers the basics of financial instruments and the markets in which these instruments trade. Consists of two sections: fixed income securities and derivative securities. Uses case studies to introduce advanced securities and institutional features of their markets in which these securities trade. Develops a framework for analyzing new financial instruments including decomposing a security into simpler pieces, analyzing (pricing, hedging, etc.) each piece separately, and putting the pieces back together for a unified analysis. Explores the security design process, and the role and motivation of financial intermediaries, including commercial banks, investment banks, insurance companies, and hedge funds. Prerequisite: FNCE 455. (3 units)
FNCE 696. Experimental Course
Covers special topics; offered on an occasional basis. (3 units)
FNCE. 854. Financial Management and Investment Analysis
Introduces the basic concepts and tools of finance. Reviews balance sheet and income statement categories. Emphasizes the time value of money, present value calculations, the opportunity cost of capital, valuation of simple securities, and evaluating investment opportunities in a capital budgeting system. Evolves into a study of investment securities and markets, a review of valuation tools, and analyses of stocks, bonds, and derivatives. Requires constructing portfolios and the controlling investment risks. Open to AMBA program students only. (6 units)
