IB9RQ-15 Advanced Financial Management
Introductory description
This module is part of a pair of modules to cover the Finance core for the new MSAFM course. Both modules will cover both the buy side and sell side angle, but split content by depth of coverage into foundations (parallel proposal, Term 1) and advanced topics (this proposal, Term 2 module).
This module will build on the foundations of finance theory (recalling that typical MSAFM students will be “non-specialists”) laid down in the Term 1 module, and provides the depth required for certain career destinations targeted by MSAFM
Module aims
- Extend the range of financial instruments introduced in the “foundations” module to include more complex structures (e.g. derivatives), and explore their “use cases”.
- Develop a general framework for the valuation of contingent claims by “replication”, and explore the complexities of operationalising this framework.
- Extend the ideas of “factor pricing” (CAPM) from the “foundations” module to include multiple factors, ultimately leading to “arbitrage pricing theory”.
- Extend the understanding of the factors that drive corporate financial decision making to include more complex frictions and structures.
- Explore different corporate governance structures, both from the angle of efficiency of decision-making as well as considerations of ethics and social responsibility.
- Provide students with structured opportunities to practise the acquired skills and knowledge using “real world” data and case studies
Outline syllabus
This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.
Classification and usage of “Derivatives”
Valuation by “Replication”
Extending the CAPM: Arbitrage Pricing
Topics in Capital Structure
Topics in Capital Budgeting
Corporate Governance
Securities Valuation Methods
Applications in Risk Management and Corporate Decision-Making
Learning outcomes
By the end of the module, students should be able to:
- Identify and evaluate the reasons why and how firms raise capital and the related financial market frictions
- Discuss and demonstrate clear understanding of how firms choose capital investments, and the main drivers of firm value
- Discuss and demonstrate clear understanding of why and how firms disburse cash to their investors
- Critically assess the factors that determine the optimal investment, financing and payout decisions of a firm
- Analyse case studies and formulate arguments to support a particular solution.
Indicative reading list
Bodie Z, Kane A & Marcus AJ (BKM) Essentials of Investments (12th “international student” edition), McGraw-Hill 2022
Hillier D, Ross SA, Westerfield RW, Jaffe J & Jordan BD (HRWJJ) Corporate Finance (4th “European” edition), McGraw-Hill 2020
Research element
The group project will be based on an empirical investigation of “real data” that enables students to practice the application of acquired skills and knowledge, and the interpretation of empirical results in the context of the theory learned
Subject specific skills
Assess models and theories of subject knowledge and understanding, vis-a-vis empirical evidence, in different context and assumptions.
Compute the cost of capital of a firm under alternative assumptions
Use alternative methods for valuing firms to gain important insights into value drivers
Construct spreadsheets to value the equity and debt in a firm’s capital structure, and test the robustness of those values to changes in key inputs
Explain and interpret corporate financial information from the financial press
Transferable skills
Solve structured numerical problems.
Written communication
Study time
| Type | Required |
|---|---|
| Lectures | 9 sessions of 2 hours (12%) |
| Seminars | 9 sessions of 1 hour (6%) |
| Private study | 49 hours (33%) |
| Assessment | 74 hours (49%) |
| Total | 150 hours |
Private study description
No private study requirements defined for this module.
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group D
| Weighting | Study time | Eligible for self-certification | |
|---|---|---|---|
Assessment component |
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| Written report on empirical group project (2,000 words) | 20% | 15 hours | Yes (extension) |
Reassessment component |
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| Individual Assignment | Yes (extension) | ||
Assessment component |
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| Class participation | 10% | 7 hours | No |
Reassessment component is the same |
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Assessment component |
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| Centrally-timetabled examination (On-campus) | 70% | 52 hours | No |
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Reassessment component is the same |
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Feedback on assessment
via my.wbs
There is currently no information about the courses for which this module is core or optional.