Corporate Financial Management

Garant předmětu:

Helmuth Yesid Arias Gomez

Lecturer:

Helmuth Yesid Arias Gomez

Tutor:

Helmuth Yesid Arias Gomez

Supervisor:

Institute of Economic Studies

Synopsis:

Analysis of financial techniques of corporations and firms when facing the financial markets.

The portfolio analysis and the implications for the Corporative Management

Modelling the parameters and alternatives for valuating the company.

Applied tools for understanding the credit operations on the market. Elaboration of amortization tables.

The course is organized 2 lectures (mean 90 minutes) weekly, 2 seminars (90 minutes) weekly. 6 credits. Z – zápočet, ZK zkouška (preliminary test and exam). This is composed by a theoretical instruction and a practical development. Heavily supported by Excel functions and formulas.

Requirements:

BSc-level courses in Mathematics, Statistics, Microeconomics, Informatics. Excel skills are appreciated.

Syllabus of lectures:

• Introduction. Generalities and Context. The money as an asset amid other assets: Keynes and Hicks.

• The yield curve, different shapes, and interpretation.

Building the interest rate curve and the dynamics of the interest rate curve.

The term structure of Interest rates.

Matrix solution of equation systems for figuring out the term structure of interest rate.

• The Time Value of Money and its Applications.

Present and Future Values. The opportunity cost of capital.

Some exercises on financial math.

Annuity and amortization table.

The Internal Rate of Return.

* Valuing Bonds

• The theory of efficient markets.

Efficient market topics:

Arbitrage and additivity.

The pure theory of expectation and arbitrage.

• Statistical backgroud: The risk return model and the

application of means, variances, covariances and correlation coefficient.

• The Concept of Risk and Return.

Portfolio Management theory. Harry Markowitz and the Birth of Portfolio Theory.

The Relationship between Risk and Return.

The variance-covariance matrix and the structure of portfolio risk

• Diversification strategy. The Envelope portfolios and the Efficient Frontier.

The CAPM Model and the individual risk. Porfolios and Beta. The role of individual Beta as indicator of the idyosindratic risk of the company.

* Portfolio Theory and the Capital Asset Pricing Model

How to estimate the individual Beta for the company.

How to estimate the individual risk premium vs the individual Beta

• WACC. The Weighted Average Cost of Capital. Modigliani and Miller Model.

How to estimate the cost of equity.

What is the interaction between cost of equity and the cost of debt?

• The short positions and their implications for the envelope portfolios

• Assesment of Portfolios and own Views. The Black Litterman Model.

The inverse enginieering process: from the Benchmark proportions to expected returns.

• Risk management, sorts of risk management.

• Corporative Debt Policy. Credit Risk and the Value of Corporate Debt. Credit Risk and the Value of Corporate Debt Derivatives and hedging risk.

• Patterns of Corporate Financing.

Common Stock and Debt.

Credit Risk and the Value of Corporate Debt.

• Financing and Valuation.

Syllabus of tutorials:

Weekly practical exercises will be assigned for solving at home.

Exercises will be the basis for stating the questionnaires for the Exam.

Grading:

. Z – zápočet, ZK zkouška (preliminary test and exam)

In compliance with the Czech system of grading, the grades will be arranged in two moments: the preliminary test and the exam.

-Preliminary test (10%): will be carried out through a one-question test. Eventually, some students having sent previous homework will be exempted from the preliminary test. (willing homework will be valid as a preliminary test.

-Exam (90%): The final exam will span the entire content of the subject and will be stated in terms of excel practical exercises supplemented with theoretical interpretation. Exam A B C D E (F failed)

Study Objective:

The content wanders the overview of traditional Portfolio Theory, and the recent updates based on the criticism to shorts positions portfolios and the traditional assumptions.

The course provides students with a comprehensive knowledge-base of corporate financial management. It focuses particularly on the skills, essential for substantiated decision-making in a corporate environment.

Significantly, the course will ensure the standardization of elementary proficiencies for students with different backgrounds and develop business English skills and technical vocabulary.

The approach of the course will follow the internal corporative and microeconomic performance of the firm, with a blatant slat towards the market and the financial context.

In analyzing the risk, the usual measure of this spread is the standard deviation or variance. The risk of any stock can be broken down into two parts.

There is the specific or diversifiable risk that is peculiar to that stock, and there is the market risk that is associated

with marketwide variations. Investors can eliminate specific risks by holding a well-diversified portfolio, but

they cannot eliminate market risk.

The finance field touts econometric techniques for gauging the measurement of the individual Beta, a parameter indicating the risk conveyed by each asset.

Study materials:

Poncet, Patrice, Portait, Roland (2022). Capital Market Finance: An Introduction to Primitive Assets, Derivatives, Portfolio Management and Risk. Springer Textbook.

Shuangzhe Liu & Milind Sathye (2021). Financial Statistics and Data Analytics. MDPI. Basel.

Benninga Simon and Mofkadi Tal (2022). Financial Modeling, fifth edition Edition. MIT Press.

Benninga Simon and Mofkadi Tal (2018). Principles of Finance with Excel. Oxforfd University Press.

Braimarte, Paolo. (2018). Introduction to Financial Markets - A Quantitative Approach. Wiley. John Wiley & Sons Inc.

Brealey Richard A, Myers Stewart C. Allen, Franklin. Principles of Corporate Finance 2011 TENTH EDITION. McGraw-Hill/Irwin

Le Bellac, Mathieu & Viricel Arnau (2017). Deep Dive into Financial Models: Modeling Risk and Uncertainty. Word Scientific Publishing Co.

Oxford (2014). Dictionary of Statistics. Oxford University Press.

Moorad Choudhry (2001) The Bond and Money Markets: Strategy, Trading, Analysis. Butterworth-Heinemann.

Oxford (201). Dictionary of Finance and Banking. Oxford University Press.

Scholes, Myron (1997). Derivatives in a Dynamic Environment. Nobel Prize Lecture. Stockholm.

Quiry, Pascal, Dallocchio, Maurizio, Le Fur Yann Salvi Antonio (2005)Corporate Finance. John Wiley & Sons Ltd.

Wilmott Paul (2006). On Quantitative Finance. Second Edition. John Wiley & Sons Ltd.

Brealey Richard , Stewart C. Myers, Alan J. Marcus. Fundamentals of Corporate Finance. 1999 by The McGraw-Hill Companies, Inc.

Recommended Complements:

Black, F & Scholes M. The Pricing of Options and Corporate Liabilities. Journal of Political Economy. 81, 637-654.

Kahneman Daniel (2002). Maps of Bounded Rationality a Perspective on Intuitive Judgment and Choice. Nobel Prize for Economics Lecture. Stockholm. In: https://www.nobelprize.org/uploads/2018/06/kahnemann-lecture.pdf

Markowitz Harry (1990). Foundations of Portfolio Theory. Nobel Prize for Economics Lecture. Stockholm. In: https://www.nobelprize.org/uploads/2018/06/markowitz-lecture.pdf

Merton Robert. (1997). Application of Option-Pricing Theory: Twenty-five years later. Nobel Prize for Economics Lecture. Stockholm. In: https://www.nobelprize.org/uploads/2018/06/merton-lecture.pdf

Sharpe William (1990). Capital Asset Prices with and without Negative Holdings. Nobel Prize for Economics Lecture. Stockholm. In: https://www.nobelprize.org/uploads/2018/06/sharpe-lecture.pdf

Note:

Time-table for winter semester 2022/2023:

	06:00–08:0008:00–10:0010:00–12:0012:00–14:0014:00–16:0016:00–18:0018:00–20:0020:00–22:0022:00–24:00
Mon
Tue
Wed
Thu	roomDEJ:102 Arias Gomez H. 09:00–10:30 (lecture parallel1) Dejvice 102roomDEJ:102 Arias Gomez H. 10:45–12:15 (parallel nr.101) Dejvice 102
Fri

Time-table for summer semester 2022/2023:

Time-table is not available yet

The course is a part of the following study plans:

• Prospectus (elective specialized course)
• N-PRI-prez.forma od 16/17 (compulsory elective course)
• N-PRI-prez.forma od 17/18 (compulsory course of the branch)
• PRI-P navazující prezenční studium od 18/19 (compulsory course of the branch)
• N-PRI-CP prezenční navazující studium od 18/19 (compulsory course of the branch)
• N-PRI-CP prezenční navazující studium od 19/20 Financial Management (compulsory course of the branch)
• Innovation Project Management od 2019/20 (compulsory course)
• N-PRI-CP prezenční navazující studium od 20/21 Financial Management (compulsory course of the branch)
• N-PRI-CP prezenční navazující studium od 21/22 Financial Management (compulsory course of the branch)
• N-PRI-CP prezenční navazující studium od 21/22 Regional Studies (compulsory elective course)
• N-PRI-CP prezenční navazující studium od 21/22 Process Management (compulsory elective course)
• N-PRI-CP prezenční navazující studium od 21/22 Project Management (compulsory elective course)
• IPM Compulsory Courses (compulsory course in the program)