EM532 - Finance for Engineering Management

Fall 2016 Syllabus

Instructor:

Bahar C
avdar
Office: 208
e-mail: bcavdarATmetu.edu.tr
Office hours: TBA

Teaching Assistants:
Class Room:
Class Times:

TBA
TBA
18.20, Tuesday

Course Description: This course is intended to familiarize the students with basic terminology,
issues, fundamental concepts of financial management and optimization techniques in finance.
Topics that will be covered include the following:
Review - Part I
Cash flow equivalence
Perpetuities and annuities
Interest rates
Review - Part II
Probability
Loans
Optimal Portfolio Choice and the Capital Asset Pricing Model
Financial Options Analysis
Financial options basics
No-arbitrage, replication, risk-neutral valuation
Lattice models for valuation
European style options
American style options
Advanced options
Decision analysis
Clarification of embedded project options
Real option analysis
Case 1: Delay option
Case 2: Installment option
Case 3: Growth option
Case 4: Learning option
Decision-tree analysis
Value of information via Bayesian updating and contingent decision-making
Asset/Liability and Asset Pricing
The lockbox problem
Constructing an index fund
Portfolio optimization with minimum transaction levels

Reference Texts:
David G. Luenberger, Investment Science, 1998 - Oxford University Press
Gerard Cornuejols and Reha T
ut
unc
u, Optimization Methods in Finance, 2007 - Cambridge
University Press.
Grading:
Class participation: 10%
Homework and Quiz: 20%
Midterm exam: 30%
Final exam: 40%
You can only miss the midterm exam with a METU-approved reason. If you miss the midtermexam, the final exam will replace it.