FINANCE. Master of Science in Finance STUDY PROGRAMME

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1 2 FINANCE GOALS AND CONTENTS Finance is the area of economics that studies investment decisions. These decisions are fundamental to the well-being of firms and individuals. Investment outcomes are affected by randomness. Investment decisions involve trade-offs between risk and expected return. The Master programme stretches over two years (120 ECTS) and is structured to allow the students to personalise their study curricula according to their individual interests and educational backgrounds. It includes four semesters of lectures and seminars, and an internship. Typically, in the first semester students attend the foundation courses in order to acquire the basics of finance, accounting and statistics. The second and third semesters are dedicated to core courses and electives. The final thesis should show the candidate s ability to integrate acquired knowledge in the advanced scientific analysis of a topic in finance. A thorough understanding of risk is necessary to the good management of financial assets A thorough understanding of risk is necessary to the good management of financial assets. Therefore the first semester is dedicated to the economic and statistical foundations of financial markets and the quantitative disciplines necessary to model them. This knowledge is then applied to the analysis of financial instruments and their markets in the core courses of the second and third semesters. Because the programme is based on rigorous quantitative methods, students are required to take the core courses before they can chose electives. The final thesis should then show the candidate s ability to integrate acquired knowledge in the scientific analysis of quantitative finance problems. The programme is based on rigorous quantitative methods Investment decisions are fundamental to the well-being of firms and individuals The Swiss Finance Institute at the University of Lugano coordinates the Master in Finance. The Swiss Finance Institute is an initiative sponsored by the Swiss Bankers Association with the purpose of achieving international excellence in banking and finance education and research at Swiss universities. The Institute is highly committed to banking and finance education in Ticino and Switzerland. The importance of the financial area for the Swiss economy strengthens the mission of the Institute to train the people required to meet the challenges of globalisation and the increasing competition in financial markets. STUDY PROGRAMME FIRST SEMESTER Foundation Courses (30 ECTS) Accounting 6 Capital Markets 6 Corporate Finance 6 Financial Econometrics 6 Probability and Finance I 3 Statistics 3 SECOND SEMESTER Core Courses (30 ECTS) Derivatives 6 Financial Intermediation 6 Financial Instruments 6 Financial Statement Analysis 3 Introductory Corporate Governance 3 Probability and Finance II 6 THIRD SEMESTER Electives Advanced Corporate Governance 3 Advanced Derivatives I 3 Advanced Derivatives II 3 Financial Engineering 6 Financial Modelling 6 Fixed Income 6 Global Investment Research 3 Introduction to Institutions and Economics of Pensions and Aging 3 Pension Economics and Finance 3 FOURTH SEMESTER Electives Advanced Business Valuation 3 Advanced Corporate Finance 6 Behavioral Finance 3 Corporate Banking 6 Private Banking 6 Risk Management 6 Structured Products 6 Alternative Investments 3 Internship 6 Thesis 18 Field Project (optional) 12 Total ECTS required 120 Total ECTS offered 144 * Master in Finance students who participate in a Field Project are not requested to do the internship The Master degree in Finance is obtained with a total minimum number of 120 ECTS, including the internship and final thesis. Slight changes in the study programme may occur.

2 4 FINANCE FIRST SEMESTER FOUNDATION COURSES Accounting The Accounting course consists of three parts. 1. The first part is a quick review of basic accounting concepts and rules. It is intended to uniform students backgrounds and languages inside the financial accounting field of studies. 2. The second part is focused on the evaluation of main financial statements items according to IAS (International Accounting Standards) / IFRS (International Financial Reporting Standards). The aim of this part is to make students understand the general principles of IAS/IFRS, the structure of Financial Statements (IAS/IFRS compliant) and the recognition and assessment rules provided by the same accounting principles. 3. The third part is focused on financial statements analysis for both individual and consolidated financial statements, in particular on: income statement and balance sheet formats; main liquidity, solvency and profitability ratios; cash flow statement; basic group (or consolidation) accounting. The aim of the third part is to enable students to evaluate the whole economic-financial position of complex organizations through the systematic use of the information included in the public financial statements. All three parts are taught through theoretical lessons, cases and practical exercises. At the end of the course, students are able to interpret and analyse financial statements and assess the quality of accounting disclosure. Capital Markets The course is an introduction to the institutions and economic functioning of capital markets. First, the course provides a general description of the basic features of these markets: the asset classes, the trading mechanisms, and the main actors. Then, it deals with individual portfolio choice. Next, individual portfolios are aggregated to derive the main concepts of equilibrium in equity markets (CAPM, APT). These concepts are used to introduce the notion of market efficiency. The empirical evidence on market efficiency is discussed and analyzed from the point of view of classical and alternative theories of capital markets, such as Behavioral Finance. As a new chapter, the course deals with fixed income securities (prices, yields, the term structure, and bond portfolios management). The course then examines the tools that financial analysts use to make investment decisions (macroeconomic and equity analysis). Finally, all the notions developed during the course are used to study applied portfolio management. In this context, the tools to analyze the performance of different types of investment funds are introduced. Corporate Finance This course teaches the logic underlying the firm s financial decisions: investment, financing, and payout policies. The main themes will be: What is corporate finance? The concept of value The discounted cash-flow (DCF) method in theory and practice Capital budgeting decisions Market efficiency and financial policy Financial structure and the Modigliani-Miller theorem Payout policies: dividends and share repurchases. Financial Econometrics Building on the material acquired in a basic introductory course in econometrics, the aim of this course is to familiarize the student with some of the most popular econometric methods encountered in applied work in finance. After a brief review of the classical linear model, three major topics are considered: The Linear Factor Pricing Model Likelihood Methods, with an application to ARCH and GARCH models The Generalized Method of Moments Emphasis is placed on the basic understanding of each approach, together with computer applications on real data. Probability and Finance 1 The course gives an elementary introduction to probability theory and stochastic processes for nance, by focusing on discrete probability spaces and their modeling applications to nance. The lecture starts from the setting of a simple binomial pricing model to introduce key probability concepts that are useful for applications. It rst covers the concepts of random variables, stochastic independence, conditional and unconditional expectations, and martingale processes, with some examples of applications to the pricing of derivatives in arbitrage-free markets. Finally, the idea of a state price and the relation to measure changes is explained, together with some pricing examples in the context of a Capital Asset Pricing Model. Statistics The students will be assumed to have learned, in previous classes, the following concepts of probability theory and descriptive statistics. Students in need to refresh their quantitative background are advised to sit in the course Introduction to Statistics (master in Banking and Finance). On the website of the course there are also lecture notes to review the topics mentioned below that are a pre-requisite for the course.

3 6 SECOND SEMESTER CORE COURSES Derivatives This course analyses the main derivative contracts and their markets. Futures, forwards, options and swaps are the main topics. Numerical and analytical models for their valuation are presented and the empirical evidence is discussed. Financial Intermediation The course discusses selected topics in financial intermediation, with a particular focus on the role and management of financial institutions/banks. After a brief introduction into financial intermediation, the measurement and management of specific risks of financial intermediaries will be discussed. In this context, we will discuss credit ratings and credit rating agencies, which are often heavily criticised for their activities. We will discuss why rating agencies are criticised and if and how rating agencies should (and can) be regulated. The course then covers bank regulation and supervision. This part of the course will particularly focus on capital regulation and current approaches to bank regulation such as the capital adequacy guidelines set forth by the Basel Committee on Banking Supervision, widely known as Basel I, Basel II and Basel III. At the end of the course we will use the subprime loan crisis 2007/2008 and the Eurozone crisis as a case study to summarize the particular risks facing financial intermediaries. Finally, we will discuss financial intermediation in developing and transformation countries. Financial Instruments The aim of this course is to provide students with a simple but rather complete picture of some of the most important securities traded on modern financial markets. The product description is always accompanied by a study of the investment strategies involving such products and, at an introductory level, of the problem of how to price financial assets. The focus is on markets and applications more than on theory. Nevertheless all subjects will be treated within a simple but analytic approach rather than just informally and all topics include numerical exercises. Financial Statement Analysis This course is about the analysis of financial information, particularly the financial statements of companies, for making decisions to invest in businesses. The primary focus is on equity (share) valuation. The methods of fundamental analysis will be examined in detail and applied in involving multinational listed companies. Topics include models of shareholder value, a comparison of accrual accounting and discounted cash flow approaches to valuation, the analysis of profitability, growth and valuation generation in a firm, diagnosing accounting quality, forecasting earnings and cash flows, proforma analysis for strategy and planning, and the determination of price/earnings and marketto-book ratios. The course is of interest to those contemplating careers in investment banking (particularly in equity research), security analysis, consulting, public accounting, and corporate finance. It will also help with personal investment. The course will be in the form of lectures, discussions and exercises. Introductory Corporate Governance When the internet bubble burst and when numerous accounting scandals (e.g., WorldCom, Enron, Parmalat, etc.) came to light, the markets crashed and countries around the world issued new or revised corporate governance codes, including the U.S. (e.g., Sarbanes-Oxley Act). This module deals with one of the most important financial issues of our times: corporate governance. Probability and Finance 2 This class is a natural extension to Probability and Finance I taught by Prof. Fabio Trojani to continuous random variables along with an introduction to continuous-time stochastic processes. The focus will be on applications that are relevant in today s market practice as well as academics. After having taken the course you will have good knowledge of the models that are around and also how to work with them. For all topics covered many examples will deepen our intuition and un- derstanding. The main textbook is Shreve (2004). We will occasionally use Bjo rk (1998), Brigo and Mercurio (2006), Øksendahl (2000) as well as original research papers. THIRD SEMESTER ELECTIVES Advanced Corporate Governance This course provides advanced applications of corporate governance problems from the viewpoint of the chief financial officer, investment banker, management consultant, securities lawyer, and financial analyst. The course will be of an applied nature, and thus students are expected to collect, process and analyze stock market and accounting data pertaining to realworld cases in order to get a proper understanding of them. Upon completion of this course, students will gain an appreciation of complicated corporate governance issues. Finally, students will also be exposed to the latest academic research with regard to corporate governance. Advanced Derivatives 1 This second-year master course covers advanced models of derivative securities 1. Finite Differences 2. Simulation Methods 3. Exotic Options

4 8 4. Advanced numerical methods 5. The LIBOR Market Model 6. Credit risk and credit derivatives 7. Mishaps in derivative markets. The course will be mostly based on the book by Hull, Options Futures and Other Derivatives, class notes and academic papers. Advanced Derivatives 2 This course, which could equivalently be labelled as Recent Developments in the Practice and Management of Derivatives, provides a thorough grounding in recent developments in derivative evaluation and risk management relating to both equity and interest rate markets, with special emphasis on the products that are linked to developments of capital market volatility. The course draws from the Professor s unique academic expertise and professional experience in the field, as witnessed by his many academic publications in both the practice of derivatives and the rigorous conceptual grounding underlying financial economics in general, his wide experience as a teacher in the most world-renowned institutions, his equally wide experience as a presenter of difficult topics over wide audiences of both fellow researchers and practitioners and, last but not least, his professional inputs he has been giving over the years, aimed to the introduction of new tools to trade capital market volatility within global Exchanges around the world, culminating with the creation of new interest rate volatility indexes maintained by the Chicago Board Options Exchange, which parallel the well-known VIX index for equity markets. By the end of the course, the students will be familiar with a variety of topics, including (i) modeling, (ii) pricing, and (iii) trading capital market volatility, and the main foundational issues arising while pricing both equity and interest rate derivatives. The level of mathematics will be kept at a minimum level, and the course will be complemented by practical case studies the Professor has encountered over his experience to date. Financial Engineering This course provides a thorough grounding in the specific tools used in the industry practice to evaluate and hedge derivative products, relying on no-arbitrage trees and the methods of calibration of the yield curve. By the end of the course, the students will be familiar with a variety of topics, including the pricing of interest rate derivatives based on (i) implied binomial trees and (ii) Arrow-Debreu state prices, and (iii) the modeling of exotic products through calibration methods relying on SABR models - the workhorse of brokerage houses operating in over-the-counter markets. These methods are developed both in discrete and continuous time. Financial Modelling The purpose of the course is to provide students with an applied view of the theories that have been encountered in the Capital Markets course. This course is, therefore, prerequisite for Financial Modeling. You will do extensive use of Excel to develop applications within domains such as the Markowitz Model, the CAPM, Estimation of the Variance-Covariance Matrix of Returns, Equity Analysis, the Treynor-Black Model, the Black-Litterman Approach, Long-Short Portfolios, Transaction Costs, and Performance Evaluation. Fixed Income Markets This course provides a thorough grounding in recent developments in fixed income securities pricing, hedging and portfolio management. By the end of the course, the students will be familiar with a variety of topics, including: (i) the main determinants of the term-structure of interest rates, (ii) the analysis of the main products traded in credit markets, such as government and corporate bonds, bond options, callable, puttable and convertible bonds, interest rate swaps, caps, floors, and swaptions, and an analysis of the main credit derivatives such as total- return swaps, spread options and credit default swaps; (iii) a few tools used to monitor and manage credit risk, (iv) the process of securitization and the resulting structured products, with particular reference to collateralized debt obligations, N-th to default, and mortgage-based securities. Introduction to Institutions and Economics of Pension and Aging This course explains the main features of public pension systems, provides an introduction to pension economics, describes the demographic dynamics, in particular to the aging process, and discusses the future challenges faced by the pension systems. The course is worth 3 credits, and runs from September 17th to October 29th, with the addition of a final symposium held on December 3rd. It is structured around regular lectures (by prof. Vincenzo Galasso), guest lectures by prominent experts in the field, and a final symposium. The course is followed by a subsequent course denominated Pension Economics and Finance (worth 3 additional credits), which begins on November 5th. Students interested in the topic are strongly advised to take both courses. Pension Economics and Finance This course provides an introduction to the public pension systems, a detailed analysis of pension economics and finance, and discusses the future challenges faced by the pension systems in a political economic contest. The course is worth 3 credits, and runs from November 5th to December 17th. It is structured around regular lectures by professors Francesco Franzoni (FF) and Vincenzo Galasso (VG), and guest lectures by prominent experts in the field. FOURTH SEMESTER Advanced Business Valuation This course is primarily focused on the initiation, evaluation, financing and hedging of major investments. The class consists of lectures and case discussions. You should form groups consisting of approximately 4 students each for the purpose of writing up and discussing the cases.

5 11 Each group will be required to turn in a 3 page executive summary of their analysis along with the appropriate exhibits that provides more details about their work. Each student is expected to be actively involved in the case discussions. Advanced Corporate Finance In the real world, Mergers and Acquisitions (MÄ) and restructurings are the most challenging applications for financial managers and investment bankers. This course provides a comprehensive examination of selected corporate finance issues and aims at bringing together financial theory and practice in order to develop the analytical skills needed in the field. The course first provides the background necessary for the valuation of companies and their business units. The methods are then applied to the valuation of mergers, acquisitions and leveraged buyouts. The main issues arising in the takeover process, the analysis of the theoretical foundation as well as of the empirical evidence about the performance of MÄ deals will also be discussed. The course will then focus on how deals are made and how contract design can allow parties to find an agreement. Behavioral Finance This course describes the behavioralization of finance, meaning the process by which the traditional neoclassical approach to finance is modified so as to admit important elements from psychology. For this reason, the course is structured along the lines of traditional topics: portfolio selection theory, asset pricing, and corporate finance. The course describes the behavioralization of each of these topics, both from a theoretical perspective and an empirical perspective. Some of the specific questions explored in the course are as follows: What is a behavioral efficient frontier? What role do mean-variance portfolios play in a behavioral framework? How do specific psychological phenomena such as loss aversion, regret aversion, self-control, aversion to a sure loss, excessive optimism, overconfidence, representativeness, and confirmation bias impact the judgments and choices made by financial decision makers? Do corporate managers behave as if they are perfectly rational? If not, how are departures from perfect rationality manifest within corporate decisions? What is sentiment and under what conditions do market prices reflect sentiment? How can sentiment be measured empirically, both at the level of the individual and the level of the market? How is behavioral corporate finance different from neoclassical corporate finance? What is behavioral Black-Scholes? What role did behavioral finance play in the global financial crisis? Corporate Banking This course presents state-of-the art concepts of finance theory and applies them to practical corporate financing issues. The theoretical part of the course will briefly review standard corporate financing theory, then move on to the concepts of asymmetric information and agency costs, and how they play into the practical issue of raising long-term funds for a company. The applied part of the course will use case studies to bring together the major corporate finance concepts studied during the Master s program. Private Banking The course deals with the topic of the role of financial institutions in the market for asset management services, with special emphasis on the business area known as private banking. This term traditionally identifies the supply of portfolio management and other services (both of financial and non-financial nature) to individual customers belonging to the affluent segment. The main focus of the course is on the content of the service, on the nature and management problems of the suppliers and on the competitive structure of the market. In other words, emphasis is placed more on the strategic and organizational issues of providing private banking services rather than on the techniques and models for managing a portfolio of securities. Teaching methods are a mixture of traditional lectures, case discussions and encounters with experts working in private banking. Risk Management This course is aimed at providing the basic knowledge and tools for measuring and managing financial risks. We will begin by defining the various types of financial risks and stress the need for their management through the analysis of losses and defaults of financial institutions in the recent past. The first type of financial risk we analyze in-depth is market risk, which is measured by the Value-at-Risk (VaR). We will discuss the estimation of the main inputs surrounding the calculation of the VaR and the possible methodologies available for determining the VaR of individual assets and portfolios. The second half of the course focuses on credit risk. We will define the objects of interest in evaluating credit risk and explore several classes of models which have been proposed for its measurement. We will then look at the derivative products that are available to transfer credit risk, such as credit default swaps, and discuss their pricing. Finally, the course concludes with a discussion on the regulatory requirements of financial institutions (Basel Accords) and on the need for integrated risk management. Structured Products In an extensive interpretation, we may speak of structured products as soon as we combine two or more elementary financial products into a new structure displaying original characteristics. Structured products represented one of the most rapidly growing areas of finance in the last two decades, reaching a nearly unlimited variety of forms. The goal of this course is to provide an overview about the process of developing, marketing, and managing structured products. To this purpose, the course will analyze a certain number of popular structured products.

6 13 Alternative Investments This class provides an overview of hedge fund strategies from a practical perspective by combining lectures, case studies, and training on analytical tools tested in the classroom. Several existing styles of alternative investment strategies employed in hedge funds are discussed. In each case the sources of value creation are discussed, so that the students are trained to critically assess the viability and applicability of a particular investment approach. The class will illustrate the class material on concrete examples and facilitate debates and collective thinking among students. Students will need to bring a laptop. Basic knowledge of asset pricing concepts (e.g. cumulative returns, Capital Asset Pricing Model) and statistical concepts (e.g. mean, variance, regression analysis, etc.) is required. GENERAL INFORMATION AWARDED DEGREE Master of Science in Economics, Major in Finance LANGUAGE This programme is entirely held in English. STUDENT PROFILE AND ADMISSION REQUIREMENTS Bachelor s degree granted by a recognised university in Economics or related disciplines. Applicants are encouraged (compulsory for applicants with a Bachelor obtained in extra EU country) to provide GRE/GMAT scores in support of their application. Further information for applicants graduating from a University of Applied Sciences is available online: Applicants whose first degree was not taught in English, are required to at least have earned a B2 certificate according to the Common European Framework of Reference for Languages or an equivalent level of another proficiency certificate e.g. TOEFL, IELTS. CONTACTS USI Università della Svizzera italiana Study Advisory Service Tel studyadvisor@usi.ch Detailed course descriptions are available on: