Le Grand Syllabus 2017/2018
Z. Bodie, A. Kane and A. Marcus, Investments, McGraw Hill. Course Description : This course aims to familiarize students with the workings of ﬁnancial markets and the fundamental tools of asset valuation. Three important asset classes are covered : bonds, stocks and derivatives. The present-value formula is the cornerstone of asset valuation and constitutes our starting point. It is ﬁrst used in the context of ﬁxed-income securities, where we focus mainly on the valuation of riskfree bonds – emphasizing the relation between bond valuation and absence of arbitrage. Next, we move to stocks. Basic notions of statistics and probability are introduced, in relation to the fundamental concepts of risk, return and diversiﬁcation. We formalize the trade-off between risk and return in the context of portfolio theory, and examine how risk is priced in equilibrium according to the capital asset pricing model (CAPM). Risk-adjusted discount rates are then used in present-value calculations for the purpose of stock valuation. We then ask whether the market values stocks efﬁciently, or whether there are “abnormal” returns leading to large proﬁts that are not fair compensation for risk. Finally, we turn to derivatives – namely, futures and options. After an overview of derivatives' main uses, we cover the pricing of forward and futures as well as option valuation models, emphasizing again the relation between valuation and no-arbitrage. If time permits, the course ends with a brief discussion of credit derivatives and the role of securitization in the subprime crisis. Required reading : to be deﬁned.
role of prices) can help to improve learning results in class, but are by no means required. Pedagogical Format : Elective Course validation : Students will be graded according to the ECTS system used at SciencesPo. The ﬁnal exam (60 minutes) will comprise multiple choice questions and/or case studies. Exams will not be graded at the curve, but according to a preset benchmark target. Extra-credits of up to maximal 10% of the entire grade are exclusively available for an active participation in the discussions within class. Workload : Participation in classes is mandatory, according to the rules set by Sciences-Po. Lecture notes and other relevant materiels will either be distributed in class or provided as electronic versions after individual lectures. Pedagogical Method : Twelve lectures, including case studies. Active participation to the class is expected. Course Description : The class "Financial Markets : Instruments, Actors and Regulators" provides a bird's eye perspective on current developments in ﬁnancial markets, ﬁnancial innovation, related policies and associated feed-backs to the real economy. The class discusses political, institutional and legal trends and consequences generated by recent events in the ﬁnancial system. To provide a solid base for the discussion of those topics, the class starts with an introduction into ﬁnancial markets, ﬁnancial instruments and techniques to design ﬁnancial portfolios as well as individual ﬁnancial products. Building on this knowledge the class moves into the discussion of political and regulatory reactions to the recent ﬁnancial crisis, comprising already implemented ones as well as currently discussed measures. By shedding some light on the regulatory reforms driven by contemporaneous problems and developments in ﬁnancial markets, the class supports students in developing an understanding of the ongoing overhaul of the institutional and regulatory settings for the ﬁnancial system in Europe. Required reading : The different issues of the IMF Global Financial Stability Report (in particular the executive summaries 2008, 2010, 2013) introduce into the general topics of the class. The De Larosière Report (link) and the G20 Study Group on Global Credit market Disruptions (link) provide both extensive background materials.
FINANCIAL MARKETS : INSTRUMENTS, ACTORS AND REGULATORS
Semester : Spring Number of hou