FINANCE

Single discipline educational activity

Course Sheet

Course code:

00058L

Academic Year of enrolment:

2022

Year of supply:

2023/2024

Type of Course:

Characterising

Degree:

Course of 1st Cycle Degree in ECONOMICS AND COMMERCE

Disciplinary Sector:

Political Economy

Location:

PESCARA

Credits:

Programme Year:

Professor and Collaborators:

VITALE Paolo

Cycle:

Second semester

Hours of classroom activity:

Individual study hours:

153

Prerequisites:

Microeconomics, Statistics and Probability Theory

Objectives

To introduce students in a rigorous but intuitive way to core topics in finance. The course intends to define fundamental principles for asset pricing and show their practical implications within fi- nancial markets. Thus, the course describes the role of institutions and instruments in financial markets, presents modern portfolio theory and analyzes the characteristics and properties of the most important classes of financial assets.

Contents

Introduction to Finance: Financial securities and to the roles of financial securities and financial markets. Fisher's separation principle; The roles of financial institutions; The characteristics of financial markets.

Modern Portfolio Theory: Risk and return. Historical data; Diversification benefits and portfolio choice; The Market Portfolio; The CAPM and its implications; The empirical analysis of the CAPM, the APT and multi-factor models; The definitions and implications of the efficient market hypothesis; Mutual fund performance and market efficiency.

Fixed Income Securities: Institutional aspects and characteristics; The present value; Bond prices and interest rates; The term structure of interest rates; Theories of the term structure of interest rates; Risk and bond prices;

Equity Markets: Stock characteristics; Dividends and stock value; Investment and growth opportunities.

Derivative Markets: Forward and futures contracts; Futures markets; The arbitrage principle; Forward and futures prices; Option characteristics; The Basic pricing relationships; Option strategies; The binomial model and risk-neutral valuation.

Extended Syllabus

COURSE OBJECTIVES
To introduce students in a rigorous but intuitive way to core topics in finance. The course intends to define fundamental principles for asset pricing and show their practical implications within fi- nancial markets. Thus, the course describes the role of institutions and instruments in financial markets, presents modern portfolio theory and analyzes the characteristics and properties of the most important classes of financial assets.
TEXTBOOK
• Essentials of Investments, Bodie, Kane and Marcus, McGraw-Hill, 8th ed. (2010).
COURSE CONTENT
• Introduction to Financial Instruments and Securities Markets
The Role of Financial Assets and Financial Markets; Separation of Ownership and Management; The Role of Financial Institutions; Characteristics of Securities and Securities Markets.
Reading: Chapters 1 to 3.
• Portfolio Theory
Risk and Return; Historical Risk and Return; Diversification; Portfolio Selection; The Market Portfolio; the CAPM and its Implications; Empirical Evaluation of the CAPM, The APT and Multi-factor Models; Definitions and Implications of Market Efficiency; Empirical Evaluation of Market Efficiency; Mutual Funds Performance and Market Efficiency.
Reading: Chapters 5 to 8.
• Fixed Income Markets
Institutions and Characteristics; The Present Value; Bond Prices and Interest Rates; The Term Structure of Interest Rates; Theories of the Term Structure of Interest Rates; Risk and Bond Values.
Reading: Chapters 10 and 11.
• Equity Markets
Characteristics; Dividends and Equity Valuation; Common Ratios; Investment and Growth Opportunities. Reading: Chapter 13.
• Derivative Markets
The Characteristics of Futures and Forward Contracts; Futures Markets; The Arbitrage Principle; Forward and Futures Prices; Characteristics of Options and Options Markets; Option Basic Relations; Strategies Involving Options; The Binomial Model and Risk-Neutral Valuation.
Reading: Chapters 15 to 17.

• Student assessment will be uniquely through a final exam. This will be a closed-book, written exam, with numerical and essay type questions.

Recommended Bibliography

Essentials of Investments, BODIE, KANE AND MARCUS, McGraw-Hill, 8ª ed. (2010)

Methods of Provision

Conventional

Teaching Methods

Lectures and classes (lectures are in Italian, however class material is also available in English)

Evaluation methods

Verification of learning:

Closed-book written exam

(Exam paper is in Italian, but on request a version in English would be available for foreign students willing to take the exam in English)

Contacts/More Information

E-mail: p.vitale@unich.it

Office hours: https://www.unich.it/~vitale/Calendario.htm

Università degli Studi
"G. d'Annunzio"

Chieti - Pescara

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