FIN10 Introductory Applied Finance

• Topics

  Introductory Applied Finance is a semi-intensive course that equips students with the knowledge and tools to implement financial models using Excel. The course covers a range of topics in finance, including both standard material and more advanced topics, with the emphasis on practical application. Lectures on each topic are followed by in-depth practical classes, in which students work through real world problems using Excel. The course also introduces students to the use of Visual Basic Application (VBA) in financial modelling.

  1. Introduction to financial modelling in Excel

  2. Event studies

  3. Portfolio optimisation

  4. Performance evaluation and style analysis

  5. Value at Risk

  6. Option pricing

• Learning outcome

  On successful completion of this module, students will be able to:

  Knowledge

  • Understand the close relationship between finance theory and its application to real-world data.
  • Understand the principles of financial modelling, the characteristics of financial data, and appreciate the nuances of implementing financial models in practice, including their sustainability implications.
  • Understand the foundations and principles of VBA, including how to create macros that automate repetitive data-processing functions and write simple VBA functions to find the fair price of an option.
  • Understand the relationship between risk and return and the principles of portfolio management, including passive strategies.
  • Understand the principles and applications of option pricing.

  Skills

  • Download financial data from the internet for a range of securities, including stocks, bonds, derivatives, and currencies, and undertake a variety of financial and statistical calculations in Excel.
  • Use advanced Excel functions—including matrix operations, Solver, and regression analysis tools—to estimate variance-covariance matrices, derive optimal passively managed portfolios (with and without constraints), and perform style analysis of portfolios.
  • Conduct event studies in Excel and use this methodology to test hypotheses about market efficiency.
  • Apply the principles of duration, convexity, immunization, portfolio management, and option pricing within Excel-based models.

  General Competences

  • Work in groups.
  • Download and manipulate complex data.
  • Solve applied problems using Excel and VBA.
  • Plan and undertake independent research projects.
  • Develop their writing skills.
  • Articulate their ideas clearly.
  • Organize their thoughts logically.
  • Adapt their writing style to suit different audiences and purposes.

• Teaching

  Lectures and group-based computer classes

  The course is taught semi-intensively.

• Recommended prerequisites

  There is the strong expectation for students to have completed one or more courses in finance theory at the undergraduate level. It is important for student performance that they should have had exposure to CAPM, Portfolio Theory, Risk, Options.

• Credit reduction due to overlap

  Overlap with VOA024

• Compulsory Activity

  Each student is required to submit a short report (of no more than one side of single spaced A4) for each of the practical sessions. This report should summarize the motivation, method used and results obtained, and offer a critical assessment of the limitations of the practical exercise. The deadline for each individual report is 24 hours after the practical class.

  Lectures and practicals will take place entirely face-to-face. Physical attendance of all classes is mandatory (100%). No exceptions apart from reasonable cases (eg, health reasons) where accompanied with official evidence. Previously approved compulsory activities (work requirements) remain valid.

• Assessment

  Written group-based project. The groups must consist of 4-5 students. The deadline for submission of the project is about 2 weeks from its handout. The project in this course must be answered in English.

• Grading Scale

  Grading scale A - F

• Computer tools

  The course will introduce students to VBA.

  During the practicals, computers are essential. Please note that Apple Macs have encountered quite a few problems with some functions in Excel such as Solver.

• Literature

  Exhaustive lecture notes with Excel spreadsheets will be provided. If students wish to take their reading to the next level, the following textbook is excellent:

  Benninga, S., 2008, Financial Modeling MIT Press, third or more recent edition, 2008.

• Retake

  Retake in FIN10 will not be offered during the non-teaching semester (autumn). Only mandatory bachelor courses with an individual assessment will have a retake assessment in the non-teaching semester.

  For detailed information regarding the retake policy, please visit our website: https://www.nhh.no/en/for-students/examinations/retake-of-exams/https://www.nhh.no/en/for-students/examinations/retake-of-exams/ (copy url).