University of Connecticut

Financial Mathematics II – Applied Mathematics of Corporate Finance

Math 369

Fall 2005

 

Classes: MW: 3:00 – 4:15                                   Instructor: James G. Bridgeman, FSA

                MSB211                                                 MSB408

Office Hours: M 10:00 – 12:00                           860-486-8382                        

                       Th  10:00 –12:00                             bridgeman@math.uconn.edu

                       Th/F: 2:00 - 3:00                             instructor's web site math.uconn.edu/~bridgeman

                       Or by appointment                        course web site

math.uconn.edu/~bridgeman/math369f05/index.html

 

Context for the Course

Required for the Professional Master’s degree in Applied Financial Mathematics

Certified for SOA/CAS Validation by Educational Experience (VEE)

in the Corporate Finance Subject

 

Specific Course Content

Introduction to the Applied Mathematics of Corporate Finance

 

Required Text

Brealey & Myers, Principles of Corporate Finance (7th ed.)

 

Supplemental/Advanced Material (not required)

Various resources as referenced in the text

Chew, The New Corporate Finance/where theory meets practice (3rd ed.)

Megginson, Corporate Finance Theory

Ho & Lee, The Oxford Guide to Financial Modeling

Panjer (ed.), Financial Economics

 

Grading

Term Paper                            10%

2 Take-home Quizzes           10%

Mini-cases                            20%

Mid-term Exam                      25%

Final Exam                             35%

 

 The syllabus and grading plan are subject to change with appropriate notice to the class.

 

 

 

Outline & Intended Pace

 

Week of

Topic(s)

Chapter

Aug. 29

Financial profession – decisions about value; cash flow; valuation;

Net present value principle; opportunity cost of capital

Ch.1, 2

Sept. 5

Financial statement analysis – where (when) is the cash?

Ch. 29

Sept. 12

Free cash flow; equity valuation; project net present value

Ch.4, 5

Sept. 19

Project decisions/valuation; expected value of cash flow; variance of returns

Ch. 6, 7

Sept. 26

Market price of risk; capital asset pricing model

Ch. 8

Oct. 3

Risk adjusted opportunity cost of capital; handling cash flow uncertainty

Ch. 9, 10

Oct. 10

Where value comes from; measuring value-creation

Ch.11, 12

Oct. 17

Market returns; market efficiency; mid-term exam Oct. 19 (thru Ch. 12)

Ch.13

Oct. 24

Sources of financing; accessing financing

Ch.14, 15

Oct. 31

Dividends and returns; debt leverage on returns

Ch.16, 17

Nov. 7

Debt effects on expected cash flows

Ch. 17, 18

Nov. 14

Debt-adjusted opportunity cost of capital -- WACC

Ch.19

Nov. 28

Option cash flows; valuation when net present value won’t work

Ch. 20, 21

Dec. 5

Real options and their value

Ch.22

 

Final Exam TBD week of Dec. 12 - 16

All

 

 

Term Papers

 

A paper will be due on December 5. You may choose any of the main

topics (text chapters) in the syllabus and prepare a paper covering it in more depth, or presenting extensions of the material in it, after consulting outside references. 

 

Quizzes

 

There will be two take-home quizzes assigned, the weeks of Sept. 26 and Nov. 14.  They will be designed to challenge and you may work in teams to come up with the answers.   .

 

Mini-Cases

 

Students will submit the mini-cases for chapters 3, 4, 5, 6, 9, 10, 11, and 21 within a week after the completion of the chapter.    

 

Both the syllabus and the grading plan are subject to change with appropriate advance notice

to the class.