COURSE AIMS AND OBJECTIVES: To demonstrate the mechanisms of primary capital markets, elucidate on the theoretical foundations for financial property management and show its practical objectives.
COURSE DESCRIPTION AND SYLLABUS:
1. Property type (investments). Fixed earnings instruments - bonds, treasury notes etc.: divisions according to the issuer (government, companies...); divisions according to coupons (fixed, floating, inverse...); other divisions and characteristics (convertible/non-convertible, mortgage, with an absorption fund, with built in options...). Shares: bit shares, dividends and capital gains; other divisions and characteristics (preferential, standard, convertible/non-convertible, according to the issuer and the origin...). Real estate: earnings from real estate investments. Instruments implemented:: options, forward and future contracts, swaps, other instruments implemented. Alternative instruments: Investment funds: divisions open/closed, interpretation of a closed fund; divisions according to the way of investing: passive/active; other possible divisions and features (hedge funds, trust funds...).
2. Capital markets. Types and sizes of markets of various financial instruments: primary/secondary markets (trading); markets for various financial instruments; some known markets. Capital markets participants. Liquidity. Stock exchange indices. Factors influencing capital markets. Capital markets as a barometer. Croatian capital markets.
3. Modern portfolio theory. Investment risks: definition of risk (possible definitions, accepted definitions); historical data on returns and risks in various forms of investing. Risk dispersion. Principles and general results of the modern portfolio theory: efficacy limit; market portfolio; Capital Asset Pricing Model.
4. Evaluation of financial instruments. Bonds: coupon, running return; return till maturity, return curve; models of evaluation through modelling of interest rates (binomial models). Stocks: fundamental analysis of shares; evaluation with multiplicators and its uses (P/E, P/B...); model of discounting dividends; models of discounting cash flows (free flow of cash to stock holders...); risks and possible errors in valuation of stocks. Instruments implemented (convertible, options...).
5. Measuring the efficacy of investments. Ways of calculating returns. Investment costs: direct costs: brokerage and analyst costs, market costs etc; indirect costs: shifting markets, bid - ask spread and (li equ.), liquidity cost... Advantages of investing in investment funds. Investment strategies and aims (with respect to the type of investor, passively/actively...). Comparison of passive and active strategies. Comparison with the indices. Taxation aspects.
- E. J. Elton, M. J. Gruber: Modern Portfolio Theory and Investment Analysis, 5th edition
- B. G. Malkiel: A Random Walk Down Wall Street, 8th edition
- W. F. Sharpe et al: Investments, 6th edition
- J. C. Hull: Options, Futures and Other Derivatives, 4th edition
- J. J. Siegel: Stocks for the Long Run, 3rd edition