MSFE Courses

 

FIRST SEMESTER (Fall)

 

^{FIN 500  Introduction to Finance (4 hours): Introduction to financial markets, some of the most common securities traded in financial markets, and theories of valuation, with a brief overview of some of the important ideas in corporate finance. Net present and future value; internal rate of return; Gordon dividend model; fixed-income analysis; random cash flow; Markovitz’ portfolio theory and diversification; Sharpe’s capital asset pricing model; capital market line; free cash flow for equity evaluation; forward markets, futures and options; binomial and Black-Scholes option pricing; capital structure and corporate restructuring.}

 

^{FIN 501  Financial Economics (4 hours): Standard models of consumer and producer behavior and the implications of these models for resource allocation and market efficiency. Basic tools of microeconomics, including optimization, comparative statics, and equilibrium. Macroeconomic principles and their applications to finance are highlighted throughout.}

 

^{IE 522  Statistical Methods in Finance (4 hours): Methods of statistical modeling of signals and systems with an emphasis on finance applications. Review of linear algebra, probability theory, and spectral analysis. Linear Time Invariant (LTI) models, ARX models, Least-squares methods, Maximum likelihood methods, non-parametric and frequency-domain methods, convergence, consistency and identifiability of linear models and asymptotic distribution of parameter estimates, and techniques of model validation. Principal Component Analysis (PCA) for dimension reduction, ARCH and GARCH processes and their related models, implementation/application and case-studies of Recursive Identification, and Monte Carlo Simulation.}

 

^{IE 523  Financial Computing (4 hours): Review of Visual Basic (VB) programming: types and loops, macros, arrays, and objects. Review of C++: structures, classes, overloading, inheritance, and I/O. C++ standard libraries. Financial computing case studies. Illustrations of financial engineering topics using VB and illustrations of the same topics for financial markets using .NET.}

 

 

SECOND SEMESTER (SPRING)

 

^{IE 524  Optimization in Finance (4 hours): Basic optimization methods for financial engineering, optimization modeling languages such as AMPL and GAMS, and optimization software including the NEOS server. Linear, quadratic, nonlinear, dynamic, integer, and stochastic programming and their applications to portfolio and asset management. Optimization using values-at-risk, conditional values-atrisk, and other risk measures.}

 

^{IE 525  Numerical Methods in Finance (4 hours): Numerical methods for the pricing and risk management of financial derivatives. Monte Carlo simulation, variance reduction techniques, quasi-Monte Carlo methods, finite difference methods for ordinary differential equations and parabolic partial differential equations, explicit and implicit schemes, handling of various boundary conditions, and free boundary problems for American options.}

 

^{FIN 512  Financial Derivatives (4 hours): Introduction to options, futures, swaps and other derivative securities; examination of institutional aspects of the markets; theories of pricing; discussion of simple as well as complicated trading strategies (arbitrage, hedging, and spread); applications for asset and risk management.}

 

^{IE 526  Stochastic Calculus in Finance (4 hours): A stochastic calculus approach to the pricing and risk management of financial derivatives: No-arbitrage pricing; the binomial model; Brownian motion; the Black-Scholes-Merton model; stochastic-volatility and jump models. Computational methods including numerical solutions of partial differential equations. Monte Carlo simulation and Fourier transform methods.} 

 

 

SUMMER INTERNSHIP

 

 

THIRD SEMESTER (FALL)

 

^{FIN 580  Risk Measures and Management (4 hours): The course will cover the main ideas and tools for financial risk measurement, as currently practiced at some of the leading financial institutions. The techniques covered will include, among others, value-at-risk, credit value-at-risk, and stress testing. It will consider their strengths and limitations, and the criticisms that have been made of internal risk management. The course will study a number of cases of risk management failures in order to identity the lessons that can be learned from the risk management failures. Students will be expected to prepare for and participate actively in the case discussions.}

^{FIN 516  Term Structure Models (4 hours): The LIBOR market model (LMM), its calibration, implementation, and use in valuing interest rate derivatives, including interest rate exotics and Americanstyle options with the LMM. Review of the simpler Hull-White, Black-Derman-Toy, and Black-Karasinski models that are still in widespread use. Applications of Monte Carlo methods (in the LMM) and finite-difference or “tree” methods (in the other models).}

 

^{IE 527  Financial Engineering Project (4 hours): Project-based course. Students work individually or in teams to develop solutions to problems in finance supplied by industry or by a faculty member associated with the MSFE program. A midterm and final report summarize the work of the term.}

 

 

ELECTIVES

 
^{Applied Nonlinear Programming}

^{Advanced Corporate Finance}

^{Stochastic Processes and Applications}

^{Empirical Analysis in Finance}

^{Accounting Measurement, Reporting & Control}

^{Decision Analysis I}

^{Design and Analysis of Experiments}