FINANCIAL ANALYTICS

Course Objective

To equip students with an understanding of the “importance and role of financial analytics” in modern business enterprises and how business firms can take advantage with the help of financial analytics. Further, for students who wish to specialize in analytics, the course provides a strong foundation for the application of financial analytics with analytical platforms.

Learning Outcomes:

At the end of the course the student should be able to

  1. Explain the importance of financial analytics and applications.
  2. Handle the available business information/data more efficiently.
  3. Use analytical tools like R, SAS and MS excel efficiently in order to take managerial decisions more effectively

Detailed Syllabus

1. Introduction to Financial Analytics: Definition, relevance and scope financial Analytics, recent trends in financial analytics

2. Financial Time Series and Their Characteristics: Asset Returns, Distributional Properties of Returns, Review of Statistical Distributions and properties of financial time series.

3. The Capital Asset Pricing Model: Basics of portfolio construction. Diversification and Portfolio Optimization

4. Modelling Volatility and Risk: Volatility the financial time series. Modelling volatility using ARCH/GARCH models. Measuring and modelling risk. Application of Value at Risk (VaR)

5. High-Frequency Data Analysis and Market Microstructure: Bid–Ask Spread, Empirical Characteristics of Transactions Data, Models for Price Changes, Duration Models

6. Modelling Credit Risk: Corporate Liabilities as contingent claims, Endogenous default boundaries and optional Capital Structure, Intensity Modelling, Rating based term-structure models, Credit risk and interest-rate Swaps, Modelling dependent defaults

7. Derivative Pricing: Issues regarding derivative markets. Brownian motion, Black -Sholes model. Modelling derivative prices