Asset-Based Financial Engineering

Total Page:16

File Type:pdf, Size:1020Kb

Asset-Based Financial Engineering JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 Project Financing Asset-Based Financial Engineering Second Edition JOHN D. FINNERTY, Ph.D. John Wiley & Sons, Inc. iii JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 vi JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 Project Financing i JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Aus- tralia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and finan- cial instrument analysis, as well as much more. For a list of available titles, visit our Web site at www.WileyFinance.com. ii JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 Project Financing Asset-Based Financial Engineering Second Edition JOHN D. FINNERTY, Ph.D. John Wiley & Sons, Inc. iii JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 Copyright C 2007 by John D. Finnerty. All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. Wiley Bicentennial Logo: Richard J. Pacifico No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978)750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic formats. For more information about Wiley products, visit our Web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Finnerty, John D. Project financing : asset-based financial engineering / John D. Finnerty. p. cm. – (Wiley finance series) Includes bibliographical references and index. ISBN-13: 978-0-470-08624-7 (cloth) 1. Capital investments. 2. Capital investments–Case studies. 3. Corporations–Finance–Case studies. 4. Financial engineering. I. Title. HG4028.C4F488 2006 658.15.2–dc22 2006052986 Printed in the United States of America 10987654321 iv JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 To my son, William Patrick Taylor Finnerty, and to his teachers at Windward School who share the joy of learning with him every day v JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 vi JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 Contents Preface xv CHAPTER 1 What Is Project Financing? 1 What is Project Financing? 1 A Historical Perspective 4 Requirements for Project Financing 6 Appropriateness of Project Financing 8 An Example 9 Conclusion 12 CHAPTER 2 The Rationale for Project Financing 13 Prior Studies’ Explanations 13 The Need for Contracts 14 The Advantages of Separate Incorporation 14 Countering the Underinvestment Problem 16 Reallocating Free Cash Flow 18 Reducing Asymmetric Information and Signaling Costs 19 More Efficient Structuring of Debt Contracts 21 More Effective Corporate Organization and Management Compensation 21 Project Financing Versus Direct Financing 22 Advantages of Project Financing 22 Disadvantages of Project Financing 29 Conclusion 30 CHAPTER 3 What Is Special about Large Projects? 31 How Large Are “Large” Projects? 32 Length of Project Contracts 36 Initial Project Capital Structure 42 vii JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 viii PROJECT FINANCING Why Studying Project Finance Is Useful 46 Why Study How Large Projects Are Financed? 50 Conclusion 52 CHAPTER 4 Who Finances Large Projects? 53 Sources of Funds for Large Projects 53 Project Bonds’ Default Risk 57 Lead Arrangers, Managing Underwriters, and Advisors 65 Conclusion 68 CHAPTER 5 Analyzing Project Viability 70 Technical Feasibility 70 Economic Viability 72 Creditworthiness 74 Conclusion as to Viability 75 Assessing Project Risks 76 Completion Risk 76 Technological Risk 77 Raw Material Supply Risk 78 Economic Risk 78 Financial Risk 79 Currency Risk 81 Political Risk 82 Environmental Risk 84 Force Majeure Risk 84 Implications for Project Financing 85 The Cogeneration Project 85 Conclusion 87 CHAPTER 6 Designing Security Arrangements 88 Purpose of Security Arrangements 89 Direct Security Interest in Project Facilities 90 Security Arrangements Covering Completion 91 Security Arrangements Covering Debt Service 92 Types of Purchase and Sale Contracts 93 Raw Material Supply Agreements 97 JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 Contents ix Supplemental Credit Support 98 Insurance 99 The Cogeneration Project 100 Conclusion 102 CHAPTER 7 Structuring the Project 103 Undivided Joint Interest 103 Corporation 111 Partnership 114 Limited Liability Company 118 The Cogeneration Project 119 Conclusion 121 CHAPTER 8 Preparing the Project Financing Plan 122 General Considerations 122 Construction Financing 126 Long-Term Financing 127 Withholding Tax Considerations 129 Estimating the Borrowing Capacity of a Project 129 Loan Repayment Parameters 130 Borrowing Capacity, Assuming Full Drawdown Immediately Prior to Project Completion 130 Borrowing Capacity, Assuming Periodic Loan Drawdowns 134 Application to a Hypothetical High-Speed Rail Project 135 Annual Coverage Tests 138 Conclusion 139 CHAPTER 9 Discounted Cash Flow Analysis 141 Incremental After-Tax Cash Flows 142 The Hurdle Rate 148 Estimating the Cost of Capital for a Project 153 Net Present Value Analysis 156 Internal Rate of Return Analysis 157 Comparing IRR and NPV Analyses 159 Conclusion 163 JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 x PROJECT FINANCING CHAPTER 10 Financial Modeling and Project Evaluation 164 Preparing Cash Flow Projections 164 Preparing Projected Financial Statements 171 Evaluating a Project’s Debt Capacity 173 Measuring Expected Rates of Return 175 Sensitivity Analysis 182 Conclusion 184 CHAPTER 11 Using Real-Options Analysis to Evaluate a Project 186 Description of the Oil Field Project 186 Project’s Real Options 187 Evaluating the Project 190 Traditional DCF Analysis 205 Sensitivity of Option Value to Oil Price Volatility and to Reserve Dispersion 206 Conclusion 208 CHAPTER 12 Sources of Project Funds 209 Equity 210 Long-Term Debt Market 213 Commercial Bank Loans 214 Fixed-Rate Debt Market 219 International Capital Market 227 Supplier Credits 231 Governmental Assistance 231 World Bank Loans 236 Inter-American Development Bank 237 Local Sources of Capital 237 Conclusion 238 CHAPTER 13 Managing Project Risks 240 Interest-Rate Swaps 240 Credit Default Swaps 245 Options 251 Forwards and Futures 257 JWDD036-FM JWDD036-Finnerty March 5, 2007 20:40 Char Count= 0 Contents xi Hedging 260 Hedging with Options 262 Hedging Foreign Exchange Risk 265 Conclusion 272 CHAPTER 14 Issues for the Host Government 273 Contribution to the Host Jurisdiction’s Economic Development 273 Host Jurisdiction’s Expected Economic Return 274 Impact on the Availability of Hard Currency 275 Exposure of the Host Government to the Project’s Obligation to Repay Project Debt 276 Desirability of Precedents 277 Hibernia Oil Field Project 277 Public–Private Infrastructure Partnerships 278 Public–Private Financing Structures 280 Legislative Provisions that Can Affect Public–Private Partnerships 283 Conclusion 287 CHAPTER 15 Case Study: The Indiantown Cogeneration Project 288 Project Description 288 The Partnership and the Sponsors of the Project 293 Principal Project Contracts 296 Projected Operating Results 302 Project Financing 306 Conclusion 318 CHAPTER 16 Case Study: The Tribasa Toll Road Project 319 The Mexican Government’s Toll Road Program
Recommended publications
  • Codes of Finance Engineering Derivatives in a Global Bank
    Codes of Finance Engineering Derivatives in a Global Bank Vincent Antonin Lepinay Submitted in partial fulfillment of the requirements for the degree of Doctor of Sociology in the Graduate School of Arts and Sciences COLUMBIA UNIVERSITY 2011 © 2011 Vincent Antonin Lepinay All rights reserved Abstract Codes of Finance Engineering Derivatives in a Global Bank Vincent Antonin Lepinay Codes of Finance is an ethnography of a global bank inventing new derivative products. It describes the multiple languages invented to describe and control these new products. It analyzes the recent discussions about financial derivatives and offers a new framework to understand financial innovation. Contents Acknowledgments Preface: Financial Innovation from within the Bank Prologue: A Day in a Trader’s Life Introduction: Accessing the Organization of the Bank and Asking Questions about It Part I. From Models to Books Chapter 1. Thinking Financially and Exploring the Code Chapter 2. Hedging and Speculating with Portfolios Part II. Topography of a Secret Experiment Chapter 3. The Room as a Market Chapter 4. The Memory of Banking Part III. Porous Banking: Clients and Investors in Search of Accounts Chapter 5. Selling Finance and the Promise of Contingency Chapter 6. The Costs of Price Chapter 7. Reverse Finance Conclusion: What Good Are Derivatives? Notes Bibliography i Acknowledgments Michel Callon and Bruno Latour generously read versions of this book. Its felicitous moments owe them much: in different styles, they have always been present, extending their supervision to a protective attention that nurtured a unique environment and great relationships. At the Centre de Sociologie de l’Innovation, other scholars also were helpful readers; Fabian Muniesa stands out as a great intellectual companion.
    [Show full text]
  • Columbia University, Master in Financial Engineering
    My Life as a Quant Student: Reflections on Studying Financial Engineering at Columbia University (Disclaimer: google Emanuel Derman) After finishing my bachelor’s studies at IES and MFF UK I decided to attend Master of Science in Financial Engineering program at Columbia University. As it was quite a journey, I’d like to share my experience and hopefully inspire someone to pursue their goals in the future. About the program The Financial Engineering program at Columbia is a cornerstone program of the Industrial Engineering and Operations Research department at the Fu Foundation School of Engineering and Applied Science. It is a 36 credits program (which basically means 12 subjects) and it runs from September to either May, August or the following December, depending on how fast you want to finish. Most students choose to finish in December as it gives them enough time to have summer internship. There are six mandatory courses in the first two semesters and students can take another six electives according to their interests and/or concentration. As part of the program you can choose to concentrate in either Finance and Economics, Asset Management, Derivatives, Computation and Programming and Trading Systems. Financial Engineering itself is a multidisciplinary field involving financial theory, the methods of engineering, the tools of mathematics and the practice of programming. If you want to inspect more about the program, you can find all the information here: http://ieor.columbia.edu/ms-financial-engineering If you are interested in quant programs in general, I would suggest to take a look at this forum: www.quantnet.com You can find there plenty of resources about quant programs, applications, schools, jobs, etc.
    [Show full text]
  • Systemic Risk and the Refinancing Ratchet Effect
    Journal of Financial Economics 108 (2013) 29–45 Contents lists available at SciVerse ScienceDirect Journal of Financial Economics journal homepage: www.elsevier.com/locate/jfec Systemic risk and the refinancing ratchet effect$ Amir E. Khandani a,c, Andrew W. Lo b,c,d,n, Robert C. Merton b a Morgan Stanley, New York, United States b MIT Sloan School of Management, 100 Main Street, E62-618, Cambridge, MA 02142, United States c Laboratory for Financial Engineering, MIT Sloan School of Management, United States d AlphaSimplex Group, LLC, United States article info abstract Article history: The combination of rising home prices, declining interest rates, and near-frictionless Received 13 June 2010 refinancing opportunities can create unintentional synchronization of homeowner leverage, Received in revised form leading to a ‘‘ratchet’’ effect on leverage because homes are indivisible and owner-occupants 7 May 2012 cannot raise equity to reduce leverage when home prices fall. Our simulation of the U.S. Accepted 16 May 2012 housing market yields potential losses of $1.7 trillion from June 2006 to December 2008 Available online 20 November 2012 with cash-out refinancing vs. only $330 billion in the absence of cash-out refinancing. JEL classification: The refinancing ratchet effect is a new type of systemic risk in the financial system and does G01 not rely on any dysfunctional behaviors. G13 & 2012 Elsevier B.V. All rights reserved. G18 G21 E17 R28 Keywords: Systemic risk Financial crisis Household finance Real estate Subprime mortgage 1. Introduction mainly by the value of the underlying real estate. This feature makes the market value of the collateral very important in Home mortgage loans—one of the most widely used measuring the risk of a mortgage.1 To reduce the risk of financial products by U.S.
    [Show full text]
  • FINANCIAL ENGINEERING New & Notable Titles
    FINANCIAL ENGINEERING New & Notable Titles New Edition of Bestselling Textbook An Introduction to Derivative Securities, Financial Markets, and Risk Management (2nd Edition) by Robert Jarrow (Cornell University, USA) & Arkadev Chatterjea (Indiana University, USA) “I have read the whole book and I find it an This introductory textbook on derivatives Robert Jarrow Arkadev Chatterjea excellent book. It’s a great blend of theory and the and risk management is accessible in terms ‘institutional’ aspects of derivatives trading.” of the concepts as well as the mathematics. Rafael de Santiago With its economics perspective, the book is IESE Business School, Spain closely connected to real markets, showing how macroeconomic forces have shaped the “This book is a great resource for a rigorous introduction to derivatives, both pricing and markets, explaining the major derivative pricing markets. There is sufficient and current institutional models using algebra and introductory calculus, detail where required, and pricing and market showing students how to implement these models behaviour is regularly tied back to regulations and using basic statistics and elementary Excel institutional features for a better understanding of spreadsheet skills, and discussing the uses of the interplay between those factors. The natural derivatives while warning against their abuses. progression from equities to interest rate models is unique to this book. Thanks to an elaborate set 724pp Mar 2019 of detailed examples, references to relevant case 978-1-944659-55-4 US$138 £120 studies, a full set of worked solutions to problem sets and slides, using this book means reduced prep time without sacrificing the students’ learning Textbook: Request Inspection experience.” Thijs van der Heijden Copy at [email protected] University of Melbourne Financial Engineering Selected Works of Alexander Lipton by Alexander Lipton (MIT Connection Science, USA) “Alex Lipton revolutionized financial engineering Edited by Alexander Lipton (Quant of the Year, over a phenomenal career lasting multiple decades.
    [Show full text]
  • Careers in Quantitative Finance by Steven E
    Careers in Quantitative Finance by Steven E. Shreve1 August 2018 1 What is Quantitative Finance? Quantitative finance as a discipline emerged in the 1980s. It is also called financial engineering, financial mathematics, mathematical finance, or, as we call it at Carnegie Mellon, computational finance. It uses the tools of mathematics, statistics, and computer science to solve problems in finance. Computational methods have become an indispensable part of the finance in- dustry. Originally, mathematical modeling played the dominant role in com- putational finance. Although this continues to be important, in recent years data science and machine learning have become more prominent. Persons working in the finance industry using mathematics, statistics and computer science have come to be known as quants. Initially relegated to peripheral roles in finance firms, quants have now taken center stage. No longer do traders make decisions based solely on instinct. Top traders rely on sophisticated mathematical models, together with analysis of the current economic and financial landscape, to guide their actions. Instead of sitting in front of monitors \following the market" and making split-second decisions, traders write algorithms that make these split- second decisions for them. Banks are eager to hire \quantitative traders" who know or are prepared to learn this craft. While trading may be the highest profile activity within financial firms, it is not the only critical function of these firms, nor is it the only place where quants can find intellectually stimulating and rewarding careers. I present below an overview of the finance industry, emphasizing areas in which quantitative skills play a role.
    [Show full text]
  • Conceptual Bases of Financial Engineering in Banking
    International Journal of Research in Management & ISSN : 2348-6503 (Online) Business Studies (IJRMBS 2019) Vol. 6 Issue 4 Oct. - Dec. 2019 ISSN : 2348-893X (Print) Conceptual Bases of Financial Engineering in Banking Saipnazarov Sherbek Shaylavbekovich Ph.D Student at Banking and Finance Academy of Republic of Uzbekistan Tashkent, Republic of Uzbekistan Abstract The article discusses the conceptual foundations of financial engineering in order to identify its place and role in the development and optimization of the banking system, including from the point of view of increasing the efficiency of its activities. As a methodological basis, a set of general scientific logical-heuristic methods of analysis and synthesis, induction and deduction, the principle of interdependence were used. The author conducted a comparative study of the positions of various scientists regarding the concept of "financial engineering". It is shown that banking activities need the use of products and financial engineering tools, since they are the ones that can increase liquidity, reduce business risks and attract new customers. Keywords Financial Management, Innovations, Financial Engineering, Innovative Banking, Efficiency Of Banking System. Introduction includes the design, development and implementation of innovative One of the factors contributing to the development of the banking financial instruments and processes, as well as the creative search system is the development and implementation of new banking for new approaches to solving problems in the field of finance” technologies. Nevertheless, innovations in the banking business [16]. include not only technical developments, but also the introduction From the point of view of the financial market, the term “financial of new forms of business, methods of working in the market, engineering” is used to describe the analysis of data collected in new goods and services, new financial instruments, that is, all the financial market through the prism of scientific [15].
    [Show full text]
  • FINA 7397) the Techniques and Tactics of Project Financing (PF
    The Techniques and Tactics of Project Financing (FINA 7397) The Techniques and Tactics of Project Financing (PF) teaches the financial know-how and negotiating approaches needed by Borrowers to implement Project Finance transactions. The Course builds upon the broader strategic material covered in The Strategy of International Project Financing. However, Techniques and Tactics will go into more depth on topics such as credit assessment, deal structuring, choosing advisers, and the final negotiation and documentation of a financing. To present the material in a practical setting, Case Studies will be extensively used in this course. The cases used will emphasize the energy and petrochemical industries. Multiple cases involving the Terrasia Petroleum Products Pipeline (Teppline) and the Soro Dondar petrochemical complex (Soro Dondar) will be used to allow students to observe the evolution of an actual project financing from inception to execution. Senior executives from Societe Generale and/or ExxonMobil will join us for one or more classes and discuss specific PF cases in which they have been involved. The essential theme of the course is that PF borrowers should endeavor to control their project financing from the outset. This can best be done by making a realistic appraisal of a project’s potential to support financing, the definition of clear financing objectives and an assessment of challenges standing in the way of realizing those objectives. Based upon this assessment, borrowers should prepare their own preliminary financing plan. This work should be undertaken before the borrower’s organization commits to do PF, before talking about PF with partners and before hiring a financial adviser.
    [Show full text]
  • Financial Engineering Versus Actuarial Science
    RECORD, Volume 27, No. 2* Toronto Spring Meeting June 20–22, 2001 Session 55PD Financial Engineering Versus Actuarial Science Track: Actuary of the Future Moderator: ROBERT M. MUSEN Panelists: A. ERIC THORLACIUS JACK L.GIBSON ROBERT MUSEN Summary: The rapidly changing financial services environment creates enormous challenges to and opportunities for corporate success. The use of financial engineering is becoming more widespread. Actuaries are playing a significant role in this evolving field, but have some competition. This session explores where financial engineering is applied, who is “leading the charge,” and what are the current and future roles of actuaries. MR. ROBERT M. MUSEN: It was difficult to find speakers for this topic, because I don’t think there’s a standard definition for financial engineering. I seem to recall that it has only been about five or ten years since we developed a standard definition for actuarial science, which is a profession that has been around a long time. I think the Society actually described it in a monograph not that long ago. The approach we’re going to take is to sort of surround the topic. People who think they’re working on financial engineering or think they know what it is are going to define it from their perspective. Eric has worked with clients around the globe in life, pension, reinsurance, and property/casualty organizations. He has experience in asset and liability management analysis using stochastic modeling, the development of proprietary security, and portfolio analysis systems. Eric is the primary author of Swiss Re’s firm asset model for dynamic financial analysis and led the development of Towers Perrin’s global CAP:link system.
    [Show full text]
  • Financial Engineering I and II
    IEMS 373 Introduction to Financial Engineering Winter 2011 Professor: Vadim Linetsky Office: C251 Phone: (847) 491-2084 E-mail: [email protected] Web: http://users.iems.northwestern.edu/~linetsky/ Class Time: Tuesday and Thursday 9:30-10:50am in M228 Professor office hours: Tuesday and Thursday 11:00-12:00 TA: Lingfei Li E-mail: [email protected] TA office hours: Monday and Wednesday 4:30-5:30pm This course is as an introduction to the theory and practice of financial engineering. The course is particularly relevant to students interested in financial markets, banking, corporate finance, consulting in finance related areas, and applications of financial concepts in management. Prerequisites: 1. Multivariate differential and integral calculus (such as Math 215) 2. Probability, statistics, and stochastic models (IEMS 302, 303, 315 or comparable courses in taken Mathematics or Economics departments) 3. An introductory finance course (such as IEMS 326 or Corporate Finance in the Economics Department) 4. Computer skills (some computer programming experience in C/C++ for the team project and good command of Excel for doing homework problem sets) Textbook and Course Material: 1. Required textbook: John C. Hull, Options, Futures, and Other Derivatives, 8th Edition, Prentice-Hall/Pearson. 2. Lecture notes. Individual Homework Problem Sets: There will be a total of five homework problem sets. Project: There will be a team computer modeling project. Each team should have 3 students. Please try to make sure that each team is well balanced with respect to finance, computer programming, and mathematics skills. Exams: There will be a mid-term on Thursday, February 10th during the regular class time and a final on Monday March 14th 3:00-5:00.
    [Show full text]
  • Quantitative Finance BS in Management with a Concentration in Quantitative Finance
    SCHOOL OF MANAGEMENT Quantitative Finance BS in Management with a concentration in Quantitative Finance Recent innovations in financial markets have led to an increased demand for analytically-skilled students. Understanding pricing models in derivatives and other exotic securities requires knowledge in finance and statistics, stochastic processes and ifferential equations. The financial engineering program is designed to provide students with opportunities to pursue a mathematically challenging program of study. Students who pursue a quantitative finance concentration will be on track for placement at investment banks. Concentration Requirements and Course Descriptions Students interested in the Quantitative FInance concentration must show superior quantitative skills by having earned 56 credits, a minimum GPA of 3.5 and having achieved a grade of B or higher in FIN 311. In addition to the standard core course curriculum for the management degree, to fulfill a concentration in Quantitative Finance, students are required to complete eight required QUANT FIN courses and one additional elective. Required Coursework • MATH 224 & MATH 225 - Calculus I • MATH 226 & MATH 227 - Calculus II • MATH 304 - Linear Algebra • ECON 466 - Introduction to Econometrics • FIN 322 - Investments* • FIN 450 - Derivatives** (once per year) • FIN 465 - Arbitrage Strategies** • SCM 360 - Spreadsheet Modeling & Decision Making*** *Prerequisites - FIN 311 **Prerequisites - FIN 311 & FIN 322 ***Prerequisites - Completion of S-Core coursework Elective Coursework (Select one of the following) • FIN 324 - Corporate Finance* • FIN 430 - Financial Statement Analysis** (Fall) • FIN 440 - Fixed Income Securities* (Spring) *Prerequisites - FIN 311 **Prerequisites - FIN 311 & FIN 324 Select special topics courses available. Please see Finance faculty or Advising for approval. PLEASE NOTE: Courses are typically offered in specified semesters, however, semesters offered are subject to change based on instructor availability.
    [Show full text]
  • Financial Engineering
    MASTER OF SCIENCE DOCTORAL DEGREE GRADUATE CERTIFICATES FINANCIAL ENGINEERING In today’s fast-changing financial environment, organizations look for experts who not only understand how Quantitative Risk Managers. the financial markets work, but who Financial Services Analysts. also possess in-depth knowledge of complex investment strategies, Systemic Financial Strategists. financial modeling skills, analytical competencies, computational expertise and practical know-how. Financial Engineering at Stevens provides students with a fundamental understanding of domains applied in the quantification of financial systems STEVENS.EDU/FE and knowledge areas that are intrinsic in the structuring of financial products and markets. Graduates develop the analytical skills, technical competencies and managerial skills needed to impact areas such as systemic risk, portfolio optimization, high-frequency finance and financial networks. HANLON FINANCIAL SYSTEMS LAB Connecting the Classroom to the Lab to the Real World The Hanlon Financial Systems Lab at Stevens Institute of Technology is a state-of-the-art financial research and Lab Financial Data Resources teaching facility that supports programs at the undergraduate, Bloomberg master’s and doctoral levels. The first of its kind in the Thomson-Reuters Tick History United States, the lab is where teaching and research Thomson-Reuters Machine-Readable News Feed come together to provide a contextual learning platform for Compustat (S&P) developing and training future financial systems experts. CRSP (University of Chicago) The Hanlon Lab provides faculty and students the ability to OneTick access and analyze a vast array of financial and economic WRDS (Wharton) data, apply enterprise-level data analytical methods, conduct Full lab data resources and software can be found interactive trading simulations and develop contemporary at stevens.edu/hfslwiki financial models.
    [Show full text]
  • Financial Engineering – MRM 8610 Spring 2016 (CRN 18475) Instructor Information
    Financial Engineering – MRM 8610 Spring 2016 (CRN 18475) Instructor Information • Instructor: Daniel Bauer • Office: Room 1126, Robinson College of Business (35 Broad Street) • Office Hours: By appointment (just send me an email, I am usually in most days) • Phone / Email: 404-413-7490 / [email protected] Class Information • Location / Time: Classroom South 205 / Thursday, 4:30 pm - 7:00 pm • Website: D2LBRIGHTSPACE – https://gsu.view.usg.edu • Prerequisites: MAS and MRM students should follow the program guides at http://robinson.gsu. edu/mas/ and http://robinson.gsu.edu/mrm/. In general, you should have a background in calcu- lus (differential, integral, and multivariate), mathematical statistics, and finance. (If you do not have FI8000, you will need to do some extra reading early on, particularly on financial options and review the Bionomial option pricing model.) Experience with a spreadsheet such as Excel is required, including basic macro programming skills. Web-based courses available at Skillsoft,1 including a variety of courses on macro programming (you need to be familiar with loops, if-else statements, etc.). However, you can also complete the assignments in any programming environment of your choice (e.g., R, C++, or Python). Some programming will be necessary. Catalog Description This course introduces students to continuous-time financial models essential for the practice of mathematical risk management. It begins with a discussion of the fundamental mathematical tools from continuous-time stochastic pro- cesses including Ito’s formula, change of measure, and martingales. This provides a framework for financial concepts including hedging, complete markets, and incomplete markets. The mathematical tools and financial concepts are applied to the risk management and valuation of financial derivatives based on stocks and bonds, separately, and insur- ance company liabilities with embedded financial options.
    [Show full text]