98655 - Models and Methods for Finance

Learning outcomes

On the completion of the course, students will be equipped with the basics of financial theory, and they will be able to combine financial concepts with model design. This includes the ability to deal with basic financial arithmetics, investment opportunities, loans and amortization tables, fixed-income products and their risk. The course is applied in nature, as financial concepts will be systematically presented using spreadsheet examples. At the end of the course, students will be able to combine the understanding of financial theory with spreadsheet modelling.

Course contents

- Introduction to finance.
- The time value of money.
- Measures for evaluation of investment opportunities.
- Loans and amortization tables.
- Effective interest rates.
- Bond valuation.
- Yield curve and interest rate risk.

Readings/Bibliography

Selected chapters from the following text:
- BENNINGA, S. AND T. MOFKADI, Principles of Finance with Excel, 3/Ed., 2017, Oxford University Press.
Other relevant materials (slides, templates, papers, etc.) will be made available on the course website, available through the Virtuale learning platform.

Teaching methods

Lectures and seminars. There will typically be two classes per week.

Assessment methods

Students’ assessment will be based on a written exam, which may be completed either through two individual partial exams or through a comprehensive full written exam. Students who qualify as attending students may also earn an additional bonus through a group problem set.

- First Partial Exam: A closed-book, individual test administered after the first five weeks of classes. The exam will consist of 7 multiple-choice questions, worth 1 point each, and 4 problems, worth 2 points each, to be completed within 45 minutes. The first partial exam will be graded on a 15-point scale.

- Second Partial Exam: A closed-book, individual test administered after the second five weeks of classes. The format will be identical to the first partial exam: 7 multiple-choice questions, worth 1 point each, and 4 problems, worth 2 points each, to be completed within 45 minutes. The second partial exam will be graded on a 15-point scale.

The two partial exams jointly determine the written exam score, up to a maximum of 30 points.

Students who do not take, or do not pass, the two partial exams may complete the written exam through a comprehensive full written exam covering the entire course program. The full exam will consist of 14 multiple-choice questions, worth 1 point each, and 8 problems, worth 2 points each, to be completed within 90 minutes. The full exam will be graded on a 30-point scale.

Students who qualify as attending students may earn up to 3 additional bonus points through a group problem set.

The problem set will take place during the last scheduled class session and will consist of a 120-minute open-book session in the computer lab. Students will work in groups of 2-3, depending on class size. They will collaboratively solve finance-related problems using a spreadsheet, demonstrating their understanding of financial theory and their proficiency in spreadsheet modeling. The assessment of the group problem set may generate up to 3 additional bonus points toward the final grade. Each group will receive a single assessment, which will apply to all members of the group.

To qualify as attending students, students must attend at least 70% of scheduled classes.

A student’s final grade will be determined as follows:
- written exam score: up to 30 points;
- optional group problem-set bonus for attending students: up to +3 points.

If the final score exceeds 30, or if the student achieves the maximum score on an exceptionally well-reasoned written exam, the final grade may be recorded as 30 cum laude.

Grading scale:
- Less than 18: Fail
- 18-23: Sufficient
- 24-27: Average/Good
- 28-29: Very good
- 30-30 cum laude: Excellent/Outstanding

Teaching tools

Slides, spreadsheets. (Teaching materials will be available on the Virtuale learning platform.)

Office hours

See the website of Massimiliano Barbi