CdLM Business Administration

The course is composed of two modules. The first module provides an introduction to fundamental concepts in Financial Mathematics. It is intended to equip the students with some basic mathematical tools that can be usefully applied both in financial theory and in corporate finance. The second module delivers an introduction to quantitative mathematical models for performance evaluation which have been used in various contexts including management, economics, and business. 

 The purpose of the first module is to provide the ability to analyze standard behaviors of brokers on the financial market by understanding the relationship between performance and remunerations. The ability to build models referring to financial applications and to develop new models. The second module increases the level of ability of students to practically utilize optimization problems (linear programming models) as a useful tool for decision making. The ability to (i) find out which organization is efficient in using its valuable resources, (ii) discriminate efficient and inefficient organizations, (iii) identify sources and amounts of inefficiency in each factor for each organization. 

 

PROGRAM OF THE FIRST MODULE:

• Financial calculus

Common financial laws. One-variable and two-variable financial laws. Inflation and the real rate of interest. Rolling over and buy and hold strategies. Term structure of interest rates. Annuities and amortization plans.

• Financial choices

Financial objectives. The Net Present Value (NPV) and NPV of levered investments (APV). IRR criterium. Valuation of a fixed-income asset. Immunization, duration and convexity. "Legal" indexes of profitability. Usury interest rate.

• Financial applications

Construction of leasing contracts. Excel for financial valuations.

PROGRAM OF THE SECOND MODULE:

 Efficient Frontier

 Data Envelopment Analysis (DEA) method as the main non-parametric approaches for estimating efficient frontier. The illustration of efficient frontier and Production Possibility Set (PPS) with various returns-to-scale assumptions. Different types of relative efficiency (technical, pure technical, scale, super-efficiency, cross-efficiency, etc). Efficiency change over time (Malmquist index)

 Optimization software (DEA-Solver, GAMS)

 In order to solve the DEA models, two software, i.e. a non-commercial DEA software (DEA-Solver) and an optimization software (GAMS), are introduced. 

 Real-word applications

 Investigation of various applications in different contexts; for instance, finance (portfolio selection problem), industrial engineering (technology selection problem), management (banking industry).

 

The exam consists of a compulsory written test (lasting about 1 hour and 30 minutes) and it is aimed at ascertaining the students' ability to:

1)      briefly introduce the main concepts and tools developed in the course;

2)      use these tools to solve practical financial exercises.

 

This aim is achieved through:

1)      the formulation of three open answer questions, of a theoretical nature, with the purpose of illustrating one or more concepts developed during lessons

2)      the formulation of twelve multiple choice questions, with the purpose of carrying out short numerical exercises that require the application of the acquired competences.

The answers are to be crossed on the question paper. In addition, it is mandatory to give on a white sheet a detailed report about the given answers.

 

 The course is organized into 70 hours of lectures (1^st module: 49 hours and 2^nd module: 21 hours)

 

Suggested readings and bibliography for the first module:

E. CASTAGNOLI, M. CIGOLA, L. PECCATI, Financial Calculus with Applications, Milano, EGEA, 2013.

 L. TIBILETTI, Quantitative methods for management and finance, Exercises with solutions, Torino, Giappichelli, 2013. Ebook available http://giappichelli.it/home/978-88-348-3910-2,3483910.asp1

Suggested readings and bibliography for the second module:

COOPER, W. W., SEIFORD, L. M., & TONE, K. (2007). Introduction to data envelopment analysis and its uses with DEA-solver software and references (2^nd ed.). New York: Springer.

 

TOLOO, M. (2014). Data Envelopment Analysis with selected models and applications (1^st ed.). Ostrava: SAEL, Vol. 30. Ostrava: VSB-TU Ostrava.

(Ebook available @ http://homel.vsb.cz/~tol0013/index.htm

 Workshop: Financial Mathematics in Microsoft Excel 

Instructor: Prof. Pertti Vilpas (Metropolia Business School, Helsinki, Finland)
February 5-7, 2018
SAA School of Management, Via Ventimiglia 115, Torino