Advanced Principles of Financial Engineering

Program Type:

Thesis

Course Code:

FE 607

P:

3

Lab:

0

Credits:

3

ECTS:

10

Course Language:

English

Course Objectives:

This course brings together a wide range of finance topics with an appropriate "engineering" logic. This course is specifically geared towards graduate students and practitioners in the financial system. The course is aimed to be easy to understand by using simple graphics, basic mathematics and current examples. Discussions about the details of finance theory in the course are partially limited. However, the engineering aspects of these subjects are covered in detail. With this course, students will be able to follow current financial engineering trends and products.

Course Content:

Financial instruments: money markets, bonds, spot curve, stocks, futures markets, options; Arbitrage: static arbitrage, intertemporal arbitrage; risk exchange; Portfolio selection; Balance in the stock market; trade and information; Intertemporal valuation. Fundamentals of static and dynamic optimization, stochastic analysis, statistical expectations and financial applications.

Teaching Methods:

1: Lecture, 2: Question-Answer, 3: Discussion, 4: Simulation, 5: Case Study

Assessment Methods:

A: Testing, B: Experiment, C: Homework, Q: Quiz

Vertical Tabs

Course Learning Outcomes

Dersin Öğrenme Çıktıları	Program Öğrenme Çıktıları	Öğretim Yöntemleri	Ölçme Yöntemleri


Definition and modeling of analytical models, financial risk factors	1,2,5	1,2,3	A, C
Identifying sources of risk, and using it in risk management	1,2,5	1,2,3	A, C
Estimating and analyzing financial, credit and operational risks using various risk models	1,2,5	1,2,3	A, C
Understanding agreement mechanics, market instruments, syndication processes	1,2,5	1,2,3	A, C
Creating syndication structures with cash flow engineering	1,2,5	1,2,3	A, C
Understanding the exchange mechanics with forward interest rate swap engineering and establishing swap agreements	1,2,5	1,2,3	A, C
Interpretation of hedge ratios and predictions of models	1,2,5	1,2,3	A, C
Dynamic replication methods with syndication engineering	1,2,5	1,2,3	A, C
Understanding option mechanics and applying options engineering methods	1,2,5	1,2,3	A, C
Understanding of convexity positions engineering	1,2,5	1,2,3	A, C

Course Flow

COURSE CONTENT
Week	Topics	Study Materials
1	Introduction
2	Mechanics of Agreements and Syndication Processes
3	Cash Flow Engineering
4	Term Interest Rate Barter Engineering
5	Repo Market Strategies
6	Cash Flow Engineering in the Foreign Exchange Market
7	Midterm Exam
8	Dynamic Replication and Syndication Engineering
9	Options Engineering, Fixed Income Engineering
10	Pricing Tools
11	Volatility Engineering, Tools, Trades, and Trading
12	SMILE Dynamics and Entity Classification
13	Credit Market: CDS Engineering
14	Basic Prevention Techniques
15	Final

Recommended Sources

RECOMMENDED SOURCES
Textbook			FINANCIAL ENGINEERING AND COMPUTATION Principles, Mathematics, Algorithms; YUH-DAUH LYUU, 2004
Additional Resources			Course Notes Course website, lecture notes, financial markets laboratory, financial calculator, online resources, excel type software.

Material Sharing

MATERIAL SHARING
Documents			Guidelines and additional examples for Lecture Topics and Homework Assignments
Assignments			Homework assignments
Exams			Midterm Exam and Final Exam

Assessment

ASSESSMENT
IN-TERM STUDIES	NUMBER	PERCENTAGE
Mid-Term	1	20
Class Performance	6	20
Final Exam	1	60
	Total	100
CONTRIBUTION OF FINAL EXAMINATION TO OVERALL GRADE		60
CONTRIBUTION OF IN-TERM STUDIES TO OVERALL GRADE		40
	Total	100

COURSE CATEGORY	Expertise/Field Courses

Course’s Contribution to Program

COURSE'S CONTRIBUTION TO PROGRAMME
No	Program Learning Outcomes	Contribution
No	Program Learning Outcomes	1	2	3	4	5
1	To comprehend the basic principles of finance and to be able to apply these principles in national and international areas.					X
2	To use modern information technologies and current financial tools effectively.				X
3	To comprehend the ethical rules and social responsibility understanding accepted by financial professional organizations and to apply them in the decisions to be taken.		X
4	To have the infrastructure that will enable them to do business in multicultural, multilingual and interdisciplinary environments.			X
5	To have information about the markets and the functioning of the markets and to analyze the developments in these markets.			X	X
6	To recognize the management tools and models specific to multinational companies and to be able to apply them where necessary.
7	To understand the structure of the global economic system and to analyze how new developments will affect this structure.		X
8	To be able to use the ability of critical thinking in the decision making process.		X
9	To transfer the acquired leadership, teamwork and communication skills to the lifelong learning process.
10	To be able to manage the process with analytical and creative approaches by anticipating the opportunities and problems that dynamic working conditions may create.

ECTS

ECTS ALLOCATED BASED ON STUDENT WORKLOAD BY THE COURSE DESCRIPTION

Activities	Quantity	Duration (Hour)	Total Workload (Hour)
Course Duration (Including the exam week: 15x Total course hours/week)	16	3	48
Hours for off-the-classroom study (Pre-study, practice, review/week)	16	4	96
Homework	5+1(Proje)	60	60
Mid-term	1	10	20
Final	1	15	30
Total Work Load			254
Total Work Load / 25 (h)			10.16
ECTS Credit of the Course			10

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