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Univ of Chicago - Topics in Finance
Univ of Chicago - Topics in Finance
Course Outline
(provisional)
TOPICS IN FINANCE
PP 344
Spring 2010
Tuesdays, 3 to 6 PM
Room 140C, 1155 East 60th Street
Raaj Sah
Room 141
email: sah@uchicago.edu
Phone: 773-702-0085
Fax: 815-642-0992
OVERVIEW
This course is at a level higher than typical master's-level introductory
courses on finance. Its emphasis is on applications in some key areas of
finance. Among the areas are:
Bonds of various kinds, their analysis and valuation, ratings, issuance
and refunding. Bond securitizations of different kinds. Bond
derivatives and related matters. An understanding of all of these is
central to the functioning of municipal, local, and state authorities, of
large nonprofits, and of various other entities.
Investment management. Theory, practice, and past experience.
Special considerations that arise in the context of public retirement
funds, endowments, and similar entities.
Efficiencies and inefficiencies of markets. A summary of the vast
literature on this topic. What this literature and the global historical
experience means for the regulations of financial markets.
The main components of this course are: (i) class discussion of readings and
cases, (ii) a project report to be submitted on a topics of the students choice,
and (iii) a class presentation of the project.
COURSE MATERIAL
A quick source for financial terminology and concepts is:
Newman, Peter et al., The New Palgrave Dictionary of Money and Finance,
Volumes 1 to 3, MacMillan, 1992.
Course material is drawn from a variety of sources, including the books
noted below. Additional material might be added. I have requested the
Regenstein Library to place on reserve the books listed below. The cases and
other materials published by Harvard Business School (HBS) can be
downloaded from the website of the HBS Press. Additional materials are
available from me on the topics listed later, and also on other topics.
Reading: The term structure of interest rates, by Robert Shiller. In
Handbook-Monetary.
Reading: The U. S. debt market and the structure of interest rates. HBS.
Reading: Interest rates, market pricing, and compounding. HBS.
Reading: Note on bond valuation and returns. HBS.
Reading: Note on duration and convexity. HBS.
Case: Cougars. HBS. Note that there is an addendum to this case.
2. Fixed income applications, municipal securities.
Reading: Interest rate derivatives. HBS.
Exercises: Exercises 1 and 2. In Mason, pp. 549-550.
Reading: Municipal securities. In Fabozzi, Chapter 8.
Case: Fidelity investments: Spartan Florida Municipal Fund. HBS.
Case: Arbitrage in the government bond market. HBS.
Case: State of Connecticut municipal swap. HBS.
Reading: Interest rate options. In Hull-Fundamentals, Chapter 18
Readings: Interest rate derivatives. In Hull, Chapters 26 and 27.
3. Mortgage-backed securities, other securitization, other matters.
Reading: Bond ratings. HBS.
Reading: A note on the U. S. residential mortgage market. HBS.
Reading: Mortgage pass-through securities. In Fabozzi, Chapter 11.
GRADING
Grades will be based on individual class participation (40%), class
presentation of the project (30%), and the project report (30%). Typed
project reports, with no constraints on the minimum or maximum length, are
due at the end of the last class.
Statistical information on scores and grades (for example, a histogram of
scores, and the threshold levels for each letter grade) will be distributed.
Please let me know if you need any additional information or feedback.
PREREQUISITES
The prerequisite for this course are PP 323 and PP 324, or the instructors
consent.