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Course Detail

Course Name Financial Engineering
Course Code 15ECE378
Program B. Tech. in Electronics and Communication Engineering
Year Taught 2019


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.

Text Books

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


  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.

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