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Fnce102 Chan SH Ay20-21 t1 (Final)
Fnce102 Chan SH Ay20-21 t1 (Final)
COURSE DESCRIPTION
This course describes the role of financial markets in facilitating the flow of funds and how investors can evaluate
and price investments. The course will describe institutional features of equity, debt, foreign exchange, and
derivative markets. Students will be grounded in investment principles and their applications, including topics on
risk and return, diversification, single and multi-factor models, asset-pricing anomalies, bond portfolios, and
performance evaluation tools. The course also examines the role of financial institutions such as mutual funds
and hedge funds, and the use of risk management tools for hedging. This course builds on the foundations
provided by FNCE101 Finance and focuses on learning how the fundamental principles in finance can be applied
to financial markets and investments.
LEARNING OBJECTIVES
At the end of this course, students will be able to:
Explain the role of each financial market and compare the differences between each market
Apply the concepts of risk and return and diversification to investment portfolios
Know the single and multi-factor approaches to pricing investments
Demonstrate understanding of common asset-pricing anomalies
Understand the role of mutual funds/hedge funds and evaluate their performance
Describe the use of risk management tools, e.g., for managing foreign exchange and interest rate risk
Do note that if this course has a co-requisite, it means that the course has to be taken together with another
course. Dropping one course during BOSS bidding would result in both courses being dropped at the same time.
ASSESSMENT METHODS
Class Participation: 10% (throughout the term)
Midterm Exam: 15% (Week 7)
Project Presentation and Report: 25%
Final Examination: 50%
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classmates enhance their learning journey. Asking questions after the lecture is over, on email, or during office
consultations do not count towards class participation.
CLASS TIMINGS
This is a weekly course to be taught in one 3-hour session with a 15-min break.
USE OF CALCULATORS
In all Finance 102 sessions, only non-programmable/non-graphical calculators (and those that cannot store
text) will be allowed in quizzes, midterm exam, and final exam.
UNIVERSITY POLICIES
Academic Integrity
All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, facilitation of acts
of academic dishonesty by others, unauthorized possession of exam questions, or tampering with the academic
work of other students) are serious offences.
All work (whether oral or written) submitted for purposes of assessment must be the student’s own work.
Penalties for violation of the policy range from zero marks for the component assessment to expulsion,
depending on the nature of the offense.
When in doubt, students should consult the instructors of the course. Details on the SMU Code of Academic
Integrity may be accessed at https://oasis.smu.edu.sg/Pages/DOS-WKLSWC/UCSC.aspx.
Copyright Notice
Please note that all course materials are meant for personal use only, namely, for the purposes of teaching,
studying and research. You are strictly not permitted to make copies of or print additional copies or distribute
such copies of the course materials or any parts thereof, for commercial gain or exchange.
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For the full copyright notice, please visit: https://smu.sg/Copyright-notice or OASIS -> CAMPUS LIFE &
EXCHANGE -> CONDUCT & DISCIPLINE -> UNIVERSITY COUNCIL OF STUDENT DISCIPLINE
Accessibility
SMU strives to make learning experiences accessible for all. If you anticipate or experience physical or
academic barriers due to disability, please let me know immediately. You are also welcome to contact the
university's disability services team if you have questions or concerns about academic provisions:
included@smu.edu.sg. Please be aware that the accessible tables in our seminar room should remain available
for students who require them.
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WEEKLY LESSON PLANS
Financial Markets
Explain the nature and role of financial markets
Types of financial markets
o Fixed income markets Ch 1, 2
- Money markets, Discount yields, Government and Corporate bonds
1 o Equity markets (e.g. SGX)
o Forex markets
o Derivative markets
Financial Institutions
Explain the nature and role of financial institutions
Understand Financial Intermediation
Multi-factor Models
Explain multi-factor models of risk and return used to measure and manage
4 Ch 10, 13
exposure to multiple economy-wide factors; apply the knowledge on multi-
factor models to interpret the mechanisms of the Fama-French Three-Factor
Model and other modern multi-factor models.
Asset-pricing Anomalies
Understand the concept of anomalies and how they contradict the efficient
5 market hypothesis; describe the common types of anomalies.
Behavioral Finance
Explain the irrationalities that characterize how individuals make decisions, such
as, errors in information processing and behavioral biases that affect how
investors frame choices.
Ch 11, 12
Apply Behavioral finance concepts to analyzing patterns of stock prices -
technical analyses.
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Smart Beta Investing
Understand the smart beta investment approach as compared to the traditional
methods of investing
Midterm Exam
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4
8 Recess Week
Mutual Funds
Describe various types of investment policies of mutual funds; learn about the
costs of investing in mutual funds; explore exchange-traded funds (ETFs).
9 Ch 4, 26
Hedge Funds
Explain various hedge fund strategies; measure hedge fund performance; learn
about factors that make hedge fund performance difficult to evaluate; explain
the fee structure in hedge funds.
Risk management
Nature and types of risks; e.g. Identify and describe key price risks, currency risks and
interest rate risks
Approaches to risk management
o Risk assessment
o Risk appetite / risk policy
o Importance and limitations of information in risk management
o Risk monitoring
12 Ch 22, 23
Futures
Characteristics of futures instruments.
Use of these derivatives to manage portfolio risks.
Understand exchange rate differences and hedging methods for foreign currency risk.
Understand interest rate fluctuations and hedging methods for interest rate risk.
Explain additional risks of trading abroad, and hedging methods.
Understand the costs of hedging above risks.
13 Project Presentations
14 Study Break