- 1. Major Field Meeting Finance Department Fall 2005
2. Agenda
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- Capital Markets / Investments
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- Careers Within Each Branch
3. Capital Markets/Investments
- Perspective: The investors portfolio
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- Beta and the Capital Asset Pricing Model
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- Variances and covariances
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- Short-run risk, long-run risk
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- Security Pricing (stock, bonds, derivatives)
4. Corporate Finance
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- Capital Budgeting: Valuing investment projects
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- Net present value, real options
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- Capital structure: Debt versus equity
- What to do with the profits?
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- Dividend policy: Dividends/share repurchases/retained
earnings
5. Careers
- Money Management (buy side)
- Research, Sales and Trading (sell side)
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- Design securities to manage risks
- Investment/commercial banking
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- Managerial performance evaluation/compensation
FINANCE WEB SITE LISTS COURSE RECOMMENDATIONS BY CAREER 6.
- Use the Alumni Network to find Kellogg grads:
- http://kelloggalumni.northwestern.edu/Directory/
- 63 at Goldman, Sachs & Co.
7. Finance:Our Market Share at Kellogg
- 19% of Graduates last year took jobs in finance
- 26% of Interns last year took jobs in finance
- Finance is one of the most popular majors at Kellogg (about
tied with marketing and management and strategy).
8. Finance @ Kellogg 9. Finance I (FINC430)
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- Optimal investment decisions by firms
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- What cash flows does the project generate?
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- How to adjust for timing and uncertainty of cash flows?
- Also a lot of useful techniques applicable to personal
finance
- We deal first with time...
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- basic discounting techniques, application to stock and bond
valuation
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- capital budgeting under certainty
- ...then with uncertainty:
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- capital budgeting under uncertainty
10. Major Requirements
- Both majors build on knowledge from FINC 430 (FIN I) and FINC
441 (FIN II)
11. Finance II (FINC 441) The role of thefinancialmanager Fin I:
Valuations and investmentdecisions Fin II: Dividenddecisions Fin
II: Financingdecisions Fin II: RiskManagementand Hedging Return
rate should beappropriate Cash flowsappropriatelycomputed How much?
What form? Identifycosts andbenefits of eachfinancinginstrument
Choose theoptimal mix Identify whichrisks should be hedged Findthe
appropriateinstruments 12. Options for First Years
- Option 1: Take Required Classes
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- or Finance I/II (Turbo) (combines Fin I and Fin II in one
class)
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- Waive Finance I. Take Finance II.
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- Waive Finance I and Finance II
13. Finance Major
- Finance I &Finance II(or FIN 440 (Turbo))
- One capital market course from list F
14. Analytical Finance Major
- Finance I &Finance II (or FIN 440 (Turbo))
15. Classes
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- Derivative Markets IF (A)
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- Fixed Income SecuritiesF A
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- Venture Capital and Private Equity Investing
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- Case Studies in Venture Investment and Management
NOTE 1:You can target your courses to your career plans NOTE 2:
It is not all math! Many courses use cases and analytical
frameworks. 16. Practicum in Analytical Finance FINC-925
- The focus of the course this year will be Value Investing.
- First half: (a) formal lectures, (b) in class valuation
discussions, (c) presentations by leading value investors.
- Second half: Students will (i) design strategies for
efficiently searching for value investing strategies, and (ii)
identify an interesting value investing opportunity, in
groups.
- The course uses large data bases of returns data. You will
learn to use STATA to analyze strategies.
- Each group will make a final presentation on (i) and (ii).A
couple of leading value investors to be present during the final
presentation.
- http://www.kellogg.northwestern.edu/faculty/jagannathan/
teaching/practicum/2005/index.htm
17. New Courses This Year
- Investment Banking (Stowell, Winter 2006)
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- Focus on securities industry, Wall Street, LBO funds and hedge
funds, various functions of I-banking
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- Sarbanes Oxley and the regulatory environment, exchanges
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- M&A strategies, valuation and defense
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- Corporate financing: IPOs, SEOs, debt and convertibles
- Cases in Venture Investment and Management (Hochberg, Winter
2006)
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- Focus on evaluating early stage business opportunities and
assessing VC investments
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- Learn how to make decisions in uncertain environments
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- Based on a series of cases
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- Will revolve around in-class case analysis with the venture
capitalists and entrepreneurs involved in the cases
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- 5/5 ratings when taught at Cornell
18. More Information: Finance Department Web Page
http://www.kellogg.northwestern.edu/finance/index.htm
- Course recommendations by career
- Course offerings, descriptions
- Some course page links (see also Professors own web pages for
links)
19. Questions ? 20. Financial Decisions FINC-442
- Usescase studiesto enhance the student's understanding of
managerial financial decision making, specifically investment and
financing decisions.
- Topicsinclude short- and long-term financing, capital structure
and dividend decisions, cost of capital, capital budgeting, firm
valuation, financial and operational restructuring, and mergers and
acquisitions .
- The course issufficiently general so as to be of interest to
all students.It provides students with the opportunity to apply the
concepts and theories developed in other finance courses.
- At its most fundamental level, the course attempts to improve
problem-solving skills:problem definition, gathering and organizing
the relevant information, developing feasible alternative courses
of action, evaluating alternative choices, and recommending and
defending the best course of action.
21. Entrepreneurial Finance FINC-446
- This course teaches studentshow to become an entrepreneur by
focusing on financial aspects.
- Topics includepro forma development and review, business
valuation models, cash flow analysis and raising capital from
private investors, venture capitalists and banks.
- The course is taught using thecase methodprocess ("real life"
case studies). Periodically, technical notes will be used and
guests invited to augment subjects addressed. This is not a
quantitative analysis course. Rather, it focuses on marketing,
sales, management and strategic planning.
22. Venture Capital and Private Equity Investing FINC-445
- This course teaches students aboutthe venture capital and
private equity industry from the primary perspective of the
investor.
- Topics include the structure of VC funds, the contracts between
VCs and their investors, the contracts between VCs and
entrepreneurs, valuation of deals, monitoring of investments, and
exit strategies such as IPO / M&A
- The course is taught using a combination of lectures, class
discussions, and thecase methodprocess ("real life" case studies).
Periodically, technical notes will be used and guests invited to
augment subjects addressed. This is not a quantitative analysis
course, though frameworks for thinking about valuation are
provided.
23. International Finance INTL-470
- Managing an international business or one exposed to global
competition requires an understanding ofinternational financial
instruments, markets and institutions.This course seeks to provide
students with a working knowledge of these issues.
- Topics include the nature offoreign exchange risk;the
determination ofexchange rates and interest rates ; the management
of foreign exchange risk with forwards, options and swaps; exchange
rate forecasting; the anatomy ofcurrency speculative attacks ; and
the dynamics of the balance of payments with a focus on
understandinginternational capital flows, country debt and exchange
rate fluctuations.
24. Investments FINC-460
- This course is a comprehensive study ofinvestment theory from
the perspective of plan sponsors and portfolio managers.
- Emphasis is onoptimal portfolio construction and portfolio
performance evaluationusing modern portfolio theory and
asset-pricing models.
- Topics includeequity valuation ,benchmark tracking
,transactions costs ,term structureof interest rates and bonds,use
of derivativesin index fund management and hedge fund
strategies.
25. Money Markets and the FedFINC-451
- This course covers two aspects ofmoney markets :
financialinstitutions , and financialinstruments .
- In the first half of the course, thelinkages between the
financial system and the macro-economyare studied includinginterest
rate determination, the role of the Federal Reserveand the conduct
of monetary policy.
- The second half of the course provides an overview of the
instruments of the money market:Federal Funds, Commercial Paper,
Treasury Bills, etc.Basic valuation and hedging techniques in short
term futures and swaps are also covered.
26. Derivatives Markets I, FINC-465
- This course covers theuse and pricing of forwards and futures,
swaps and options.
- Specific topics includestrategies for speculation and risk
management , no-arbitrage pricing for forward contracts, the
binomial and Black-Scholes option pricing models and applications
of pricing models in other contexts.