Dr. Agarwal
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Certified by icici bank

 
 
 
Syllabus
 
 
 
 
Finance I: Portfolio Design

Deterministic Cash Flows: Interest, present and future value, internal rate of return.  
Fixed Income Securities: Bonds, prices and yields, duration, immunization, term structure of interest rates.  
Random Cash Flows: Asset return, portfolio return, random returns, portfolio mean return and variance, diversification, portfolio diagram, feasible set, Markowitz model, Two fund theorem, One fund theorem.  
Capital Asset Pricing Model: Capital market line, CAPM, betas of stocks and portfolios, Security market line, Use of CAPM in investment analysis and as a pricing formula.

 
Finance II: Financial Derivatives

Forwards and Futures: Forward and futures prices and values, hedging, stock index futures, currency futures.  
Options: Factors influencing options premia, Put-call parity, Binomial option pricing model (BOPM), dynamic hedging, pricing of American options.  
Black-Scholes Model: Modelling of stock prices, analogy with BOPM, delta hedging, hedging parameters – “The Greeks”.  
Option Spreads: Spreads, butterflies, straddles, and strangles.
Value at Risk (VaR): Estimating VaR by linear and quadratic models, Monte Carlo Simulation.

 
Mathematical Tools

    Single and Multivariable Calculus and applications to optimization.  
Basic Probability  
Random variables: Discrete and continuous random variables, expectation and variance, binomial, normal, lognormal and chi-square variables.  
Multivariate distributions: Conditional probability and distributions, independence, covariance, conditional expectation.  
Sampling: Sample mean and variance, large sample approximations, sampling distributions.  
Numerical Techniques (Lab)
The practical work will be based on Microsoft Excel and VBA. These will be taught as part of the course.