Core Courses

This course is intended to introduce spreadsheet (MS Excel) as a financial modelling tool and understand its capabilities and limitations. It is designed to teach candidates to apply Visual Basic for Applications (VBA) to automate spreadsheet applications and extend the functionality of the spreadsheet. Numerical derivative pricing by implementing models in VBA will be illustrated. Examples include Black-Scholes formula, Greeks Parameters, Binomial Tree and Monte Carlo Methods Statistical computations with application to Risk Management will also be demonstrated. This course will also explore to optimise the computational power of Excel through the C API.

Prerequisite: MFIN7003 Mathematical Techniques in Finance

Derivatives have become a popular hedging and investment tool over the last few decades and derivatives concept are required for every advanced finance topic. This course provides candidates with a framework (1) to understand the fundamental concepts of derivative products (forward and futures, options, swaps, and basic structured products), (2) to develop the necessary skills used in valuing derivative contracts, and (3) to understand a wide variety of issues related to risk management and investment decisions using derivatives. The course intends to provide a solid foundation for other 2 advanced courses of the program such as mathematical finance, risk management, fixed income securities, and financial engineering.

This course provides an introduction to the financial statements and financial reporting process from a user’s perspective. The course focuses on fundamental accounting concepts and principles as well as techniques related to financial statements analysis. Ethical and professional standards that persons engaged in the professional practice of financial analysis and investment management should know, understand, and apply are also covered.

This course aims to provide candidates with understanding of (i) fundamental knowledge for asset valuation, (ii) portfolio management techniques for risk management and speculation. (iii) investment strategies adopted in financial market, and (iv) the recent development of portfolio management tools and investment strategies. On the theoretical side, this course introduces fundamental knowledge for asset pricing, investment strategies, and portfolio management. On the practical side, this course covers recent topics that are related to the investment strategies and portfolio management in both Hong Kong and United States. Some projects about portfolio management and asset valuation are specially designed to let candidates apply the theoretical knowledge into practice. This course is highly recommended for candidates who intend to pursue a career or further studies in investment strategies and portfolio management. Of course, the knowledge will also be very useful when candidates make their own personal investment decision.

There are three main approaches to mathematical finance: the tree approach, the martingale approach and the partial differential equation approach. This course will present these three approaches and their applications to pricing and hedging financial derivatives. The corresponding numerical methods of the three approaches are lattice method, Monte Carlo simulation method, and finite difference method. Along the lectures, necessary mathematics, such as calculus, partial differential equation, applied probability and stochastic calculus will also be reviewed. After taking this course, candidates should be able to fully understand no-arbitrage theory, risk-neutral probability, martingale, and BlackScholes equation. The purpose of this course is to lay down a solid mathematical foundation for candidates to learn more advanced topics in financial engineering and risk management, such as exotic options, interest rate derivatives and credit risk models.

Prerequisite: MFIN6003 Derivative Securities

This course aims to provide candidates with understanding of (i) fundamental approaches for equity valuation, (ii) fundamental approaches for valuation of fixed income securities, (iii) the knowledge about corporate finance and behavioral approaches in asset valuation, and (iv) the recent development of valuation techniques. On the theoretical side, this course introduces fundamental knowledge for asset valuation, investment strategies, and portfolio management. On the practical side, this course covers recent topics that are related to the asset valuation techniques used in both Hong Kong and United States. Some projects about asset valuation are specially designed to let candidates apply the theoretical knowledge into practice. This course is highly recommended for candidates who intend to pursue a career or further studies in equity valuation and securities analysis. Certainly, the knowledge from this course will also be very useful when you make your own personal investment decision.

This module provides the foundation in economics that is essential in financial analysis. The major topics include microeconomics, macroeconomics and international economics, consumer choice, costs and the supply of goods and services, competitive and market structure, the role of government in the economy, national income accounting, business cycles, aggregate demand/supply, fiscal and monetary policies, the level and structure of interest rates, the role of expectations in economies analysis, economic analysis, economic growth, comparative advantages and international trade, international finance and foreign exchange markets. Appropriate references will be made to current issues in Hong Kong, the region and the international economy.

This course is designed to develop a solid understanding of commonly discussed and applied issues in merger and acquisitions (M&As). The topics covered in this course include the M&A process, methods of valuing a target firm, valuing synergies, the form of payment and financing, assessing the highly levered transaction, governance in M&A, and M&A negotiation. Cases in M&As will be used in the discussion of the various topics. By going through analyses and discussions of real-life M&As, candidates will gain experiences in the application of financial theory and techniques to evaluate a M&A decisions and transactions.

A comprehensive analysis of credit risk measurement and credit derivatives. Topics include credit events, expected default frequency, expected exposure, loss given default, default correlation, KMV, Credit Metrics, credit ratings performance and migration, total return swaps, credit default swaps, 3 basket default swaps, credit spread forwards and options, exotic credit derivatives, credit-linked notes, collateralised debt obligations, Basel II and SME lending.

Prerequisite: MFIN7012 Fixed Income Securities and Interest Rate Modelling

This course introduces various state of the art techniques in modeling fixed income securities. In particular, the course starts with the discount factor approach in pricing all kinds of bonds. Then it focuses on modeling the discount factors. Models are introduced in two major parts. First, the course emphasizes discrete-time models based on binomial trees in order to understand the economic insight of the risk-neutral pricing. Second, extensions to continuous-time models are also discussed in detail. Calibration and implementation of the models will be studied. Other related topics may include interest rate risk management, interest rate derivatives, and monetary policy.

Prerequisite: MFIN7005 Corporate Finance and Asset Valuation and MFIN6002 Spreadsheet Modelling in Finance

This course brings together the practical and theoretical knowledge taught in the other derivatives and risk management courses in the MFin curriculum to introduce some of the state-of-the-art option pricing models. The course dwells on the original insights of various authors for exotic option pricing and option pricing models with volatility smiles. In addition to the plain-vanilla European option model, the course discusses the continuous and discrete barrier, lookback, Asian, American, excursion option pricing models. It also discusses the jumps and stochastic volatility option pricing models, including the latest option pricing models under Levy processes. Although this course highlights the theoretical and technical motivation of the various models, its delivery requires some hands-on knowledge of MatLab programming. Candidates finished this course will be conversant to the latest development and technology in option pricing.

Prerequisite: MFIN7003 Mathematical Techniques in Finance

The objective of this course is to introduce concepts, techniques and framework for quantitative risk management at financial institutions. Financial firms, with their complicated list of positions in a mixture of instruments, are exposed to various sources of financial risk. This class focuses mainly on market risk, the risk of unexpected changes in prices and rates. The first part of the course introduces basic concepts in risk management and builds the toolkit for measuring risk quantitatively. The second part of the course is devoted to studying the widely accepted Value at Risk (VAR) systems, including calculations, back testing and flaws of VAR. The course also touches on other aspects of financial risk such as liquidity risk, credit risk and operational risk.

Prerequisite: MFIN6002 Spreadsheet Modelling in Finance

Financial engineering is the process of constructing new instruments by using bonds and individual derivatives such as forwards, calls, puts, and common exotic options as basic building blocks. The process involves designing, pricing and managing the instruments. In this course, we anatomize a few popular structured products. Some of them have been traded in the Chicago Board Options Exchange, and Hong Kong Exchanges and Clearing Limited. And others, such as equity-linked high yield notes and capital guarantee funds are sold by the commercial banks in Hong Kong. Then how to price these products by studying the price of the embedded exotic options will be discussed. The risk exposure of the retail investors and risk management for the commercial banks will be studied. Some topics on the market for volatility trading, recent development of option-pricing models and global financial crisis will also be discussed.

Prerequisite: MFIN7003 Mathematical Techniques in Finance

 This course is aimed to give candidates a solid understanding of theoretical and empirical contributions of modern corporate finance. Major topics of corporate finance, including valuation, equity offerings, financial leverage, payout policy, and mergers and acquisitions, will be extensively discussed. The course offers candidates an opportunity to appreciate how corporate managers apply financial concepts and theories to managing real business and how financial decisions generate significant impact on firm value. After taking the course, candidates are expected to possess the ability to logically evaluate a firm’s financial decisions and later resolve financial issues in real world.