COURSE SUMMARY
Course Title: 
Financial Engineering
Course Code: 
15ECE378
Year Taught: 
2015
Type: 
Elective
Degree: 
Undergraduate (UG)
School: 
School of Engineering
Campus: 
Bengaluru
Chennai
Coimbatore
Amritapuri

'Financial Engineering' is an elective course offered for the B. Tech. (Bachelor of Technology) in Electronics and Communication Engineering at School of Engineering, Amrita Vishwa Vidyapeetham.

Unit 1

Cash Flows and Fixed income securities: Investments and markets - Principal and interest - Present and future values of streams - IRR. Fixed income securities - Market value for future cash - Bond value - Bond details – Yields – Convexity – Duration - Immunization. Bond portfolio management - Level of market interest rates, Term structure of interest-rate theories.

Unit 2

Stocks and Derivatives: Common stock valuation - Present value of cash dividends - Earnings approach - Value versus price - Efficient markets theory - Technical analysis. Analysis of financial statements. Derivatives - futures and options - Black Scholes formula - Utility functions - Applications in financial decision making.

Unit 3

Portfolio analysis and capital market theory: Covariance of returns – Correlation - Portfolio return - Portfolio standard deviation - Two asset case - Efficient frontier - Optimum portfolio. Capital market theory- Capital market line - Sample diversifications to reduce risk - Characteristic line - Capital asset pricing model. Arbitrage price theory - Stock performance evaluation.

TEXTBOOKS

  1. David Luenberger, “Investment Science”, Oxford University Press, 1998.
  2. Jack Clark Francis, Richard W. Taylor, “Investments”, Schaum’s Outlines, Tata McGraw Hill, 2006.

REFERENCES

  1. Yuh – DauhLyuu, “Financial Engineering and Computation”, Cambridge University Press, 2002.
  2. Perry H. Beaumont, “Financial Engineering Principles”, John Wiley and Sons Inc, New Jersey, 2004.