Financial Mathematics II – Applied Mathematics of Corporate Finance
Math 369
Spring 2006
Classes: MW: 3:00 – 4:15 Instructor: James G. Bridgeman, FSA
MSB307 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/math369s06/index.html
For an introduction to derivatives enrollees in this course are
encouraged also to enroll in
math300, section 31:
W: 4:30 – 5:30
(starting Jan. 25)
MSB307
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 the Corporate Finance Subject
Introduction to the Applied Mathematics of Corporate Finance
Brealey Myers Allen, Principles of Corporate Finance (8th ed.)
(A Solution Manual is available and recommended)
Various resources as referenced in the text
Text CD and website mhhe.com/bma8e
Ho & Lee, The
Chew, The
New Corporate Finance/where theory meets practice (3rd ed.)
Megginson, Corporate Finance Theory
Panjer (ed.), Financial Economics
Gollier, The Economics of Risk and
Time
Term Paper 10%
2 Take-home Quizzes 10%
Mini-cases 20%
Mid-term Exam 25%
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) |
Chapter |
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Jan. 16 |
The financial profession – decisions about value; cash flow; valuation |
Ch.1, 2 |
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Jan. 23 |
Net present value principle (NPV); opportunity cost of capital; financial statement analysis – where (when) is the cash? |
Ch.2 |
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Jan. 30 |
Fin’l. stmt.analysis cont’d.; debt valuation; free cash flow; equity valuation |
Ch.29, 4 |
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Feb. 6 |
Project NPV; project decisions/valuation; expected value of cash flow |
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Feb. 13 |
Variance; market price of risk; capital asset pricing model (CAPM) |
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Feb. 20 |
CAPM cont’d. |
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Feb. 27 |
Risk adjusted opportunity cost of capital; handling cash flow uncertainty |
Ch.9, 10 |
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March 13 |
Where value comes
from; [mid-term exam March 15 (thru |
Ch.11 |
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March 20 |
Measuring value-creation; market returns; market efficiency |
Ch.12, 13 |
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March 27 |
Sources of financing; accessing financing |
Ch.14, 15 |
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April 3 |
Accessing financing cont’d.; dividends and returns |
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April 10 |
Debt leverage and returns; tax and distress effects on expected cash flows |
Ch.17, 18 |
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April 17 |
Debt-adjusted opportunity cost of capital – WACC; debt-adjusted NPV – Adjusted Present Value; valuation summary |
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April 24 |
Real options and their value: when NPV won’t work (easily) |
Ch.22 |
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Final Exam TBD week of May 1 - 6 |
All |
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A paper will be due on April 28. You may choose any of the main topics in the syllabus (i.e. chapters in the text) and prepare a paper covering the topic in more depth, or presenting extensions of the material in the text, after consulting outside references.
There will be two take-home quizzes assigned, the weeks of Feb. 13 and April 10. They will be designed to challenge and you may work in teams to come up with the answers. .
The mini-cases for chapters 4, 5, 6, 9, 10, and 11 will be due a week after the completion of the chapter.
Both the syllabus and the grading plan are subject to change with appropriate advance notice to the class.