Indian Institute of Management

Ahmedabad

Financial Markets
PGP I: 2014-15

Slots 2-3

Course Objective

The Financial Markets course is the first of the two corporate finance courses in the first
year. The first half of the course (in Slot 2) lays out the basics of the time value of money
and valuation and introduces the Capital Asset Pricing Model. The second half (in Slot 3)
is an introduction to key financial markets and securities for financing, investment and
risk management.

Evaluation Criteria

Class Participation 10%

Quizzes 20% (N - 1)
Mid term 30%
End term 40%

Instructors

Sidharth Sinha (B and D) sidharth@iimahd.ernet.in W-08 4876

Jayanth R. Varma (E) jrvarma@iimahd.ernet.in W-07 4867
Vineet Virmani (A and C) vineetv@iimahd.ernet.in W-07 4868

Academic Associates

Venu Madhav Tatiparti (A) venumt@iimahd.ernet.in W-15 4950

Mohamadnaim F. Munshi (B) mohamadn@iimahd.ernet.in W-15 4950
Vidhi Kotak (C) viddhik@iimahd.ernet.in RA-05 (NC) 4425
Ayushi Trivedi (D) ayushit@iimahd.ernet.in W-07 4870
Reena Joshi (E) rjoshi@iimahd.ernet.in W-01 4810

1
Course Plan and Readings

Text: Principles of Corporate Finance, Brealey, Myers and Allen (BMA), 10th Edition.
(BMA).

All the readings would be available on the FM Moodle page. (Make sure you have the
access to the Moodle page. If not, you should bring it the notice of your section AA).

Session Topic

1 Role of Financial Markets and Institutions

BMA Chapter 33
“Models”, Emanuel Derman, Financial Analysts Journal, Jan-Feb 2009
2-3 Time Value of Money
BMA Chapter 2, 5
4-5 Stock Valuation: Dividend Discount Model, P/E multiple and PVGO, FCF
Approach
BMA Chapter 4
6-7 Portfolio Analysis
BMA Chapter 7, 8
8-10 Asset Pricing Models
* BMA Chapter 9
* Fama, Eugene F., and Kenneth R. French 2004. "The Capital Asset Pricing
Model: Theory and Evidence." Journal of Economic Perspectives, 18(3): 25–46.
11 Market Efficiency
BMA Chapter 13
* Inefficient Markets, Andrei Shleifer, Chapter 1
12-13 Bond Markets: Spot and Forward Rates, Duration
BMA Chapter 3
14 Term Structure of Interest Rates
BMA Chapter 23 ( Section 23.1, 23.3)
15-16 Foreign Exchange Markets & Exchange Rate Parity Conditions
* BMA Chapter 27.1-27.3
* Getting Carried Away: How the Carry Trade and Its Potential Unwinding Can
Explain Movements in International Financial Markets, Jeffrey Frankel, For the
Milken Institute Review., November 2007
17-18 Forward and Futures
BMA Chapter 26.1, 26.4
19-20 Options
BMA Chapter 20, 21.5