Financial Mathematics II – Applied Mathematics of Corporate Finance
Math 369
Fall 2006
Classes: MW: 3:00 – 4:15 Instructor: James G. Bridgeman, FSA
MSB215 MSB408
Office Hours: M 10:00 – 12:00 860-486-8382
Th 10:00 –12:00 bridgeman@math.uconn.edu
Th/F: 2:00
- 3:00 websites: instructor’s math.uconn.edu/~bridgeman
Or by appointment course: math.uconn.edu/~bridgeman/math369f06/index.html
For an introduction to derivatives enrollees in this course must also enroll
in math300, section 05: (1 credit)
W: 4:25 – 5:15
MSB215
Context for the Course
Required for the
Professional Master’s degree in Applied Financial Mathematics
Certified for SOA/CAS Validation by Educational Experience (VEE) in Corporate Finance
Introduction to the Applied Mathematics of Corporate Finance
Ho & Lee, The
Various resources as referenced in the text
website www.thomasho.com
Copeland et al, Financial Theory and Corportate
Policy (4th ed.)
Chew, The
New Corporate Finance/where theory meets practice (3rd ed.)
Megginson, Corporate
Finance Theory
Brealey Myers Allen, Principles of Corporate Finance (8th ed.)
Panjer (ed.), Financial Economics
Gollier, The Economics of Risk and
Time
Term Paper 20%
Cases & Assignments 25%
Mid-term Exam 20%
Final Exam 35%
Both the syllabus and the grading plan are subject to change with appropriate advance notice to the class.
Outline & Intended Pace
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Week of |
Topic(s) |
Material |
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Aug. 28 |
decisions about value; expected cash flow; valuation: DCF; risk: OCC |
Ch.1, class notes |
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Sept. 4 |
financial statement analysis – where (when) is the cash? |
handouts, notes, pages 506-509 |
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Sept. 11 |
efficient market hypothesis; cash flow variance; CAPM |
Ch. 2, class notes |
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Sept. 18 |
CAPM and alternatives; market price of risk; certainty equivalents |
Ch. 2, class notes |
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Sept. 25 |
valuation of the firm: comparables; dividend discount; cost of equity |
Ch. 12, class notes |
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Oct. 2 |
valuation within the firm: debt; FCF; WACC; MM theory; taxes |
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Oct. 9 |
valuation within the firm: alternatives to DCF; FCF discount; rebalancing |
Ch. 12, class notes |
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Oct. 16 |
mid-term exam Oct. 16; practical valuation issues |
class notes |
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Oct. 23 |
practical valuation issues; where does value come from? |
class notes |
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Oct. 30 |
option value model; growth and real options |
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Nov. 6 |
strategic value of the firm; strategic value within the firm |
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Nov. 13 |
option value vs. DCF; financing decisions: MM, pecking order, Lintner |
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Nov. 27 |
financing decisions: trade-off; cost of distress |
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Dec. 3 |
financing decisions: contingent claim point of view; final review |
Ch. 14, class notes |
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Final Exam TBD week of Dec. 10 - 15 |
All |
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A paper will be due on Dec. 7. You may choose any of the main topics in the syllabus (i.e. sections in the text or from class notes) and prepare a paper covering the topic in more depth, or presenting extensions of the material in the text or class notes, after consulting outside references. Alternatively, you may choose a topic from sections of the text not covered in the syllabus and explain how it works, including its connections with the material covered in the syllabus.
Cases and Assignments
Significant business cases or homework exercises based on the material most recently covered will be assigned approximately every two weeks.
Both the syllabus and the grading plan are subject to change with appropriate advance notice to the class.