Research & Teaching Pages of Patrick Toche, keywords: "economics", "toche", "patrick toche"

Fall 2016 -- LBA213 -- Foundations of Finance

News

  • Keep informed about homework, changes to the timetable, and other important news

  • Direct Link to this Page (refresh your browser and delete the cache if necessary to see updates)

  • Monday 5 September 2016

  • Mon 5 & Tue 6 September
    • Topic: Financial Crises
      • Common features of financial crises
      • The great housing bubble
      • Securitization
      • Leveraging
      • Bank runs
      • Policy responses

  • 8 September
    • Question: In a financial crisis, do we expect prices to rise or fall?
      • If it's a "public finance" crisis (mismanagement of public finances, including issuing too much money or too much debt), a price rise is possible (hyperinflations are caused by public mismanagement on a large scale) - the threat is inflation.
      • If it's a "private market crisis" originating in a panic or change of conditions in the financial markets, then prices typically fall -- the threat is deflation.

  • Mon 12 & Tue 13 September
    • Topic: Financial Crises (Continued)
      • Common features of financial crises
    • Reading

  • Mon 19 & Tue 20 September
    • Topic: Financial Crises (Continued)
      • The great housing bubble
    • Homework
      • Plot an up-to-date Case-Shiller index going back to 2000.
      • Plot the year-on-year growth rate of the Case-Shiller index.
      • There are several versions of the index: select as appropriate.
      • Data may be found here: http://research.stlouisfed.org/fred2/.
      • You may use Fred's online graphing capabilities or download the data and produce your own graph.
      • If you use Fred's online graphs, I recommend you open an account and save your graphs.
    • Reading

  • Mon 26 & Tue 27 September
    • New Class Schedule: Monday 12:30-15:15 Room D-06
    • Topic: Financial Crises (Continued)
      • Securitization, leveraging, bank runs, policy responses
      • Mortgage-Backed Securities: slicing, bundling, risk sharing and sub-prime defaults
      • You are expected to understand how mortgage-backed securities (MBS) are structured, including the difference between CMO, and CDOs.

  • Mon 3 & Tue 4 October
    • No Class: Public Holiday (China National Holidays).

  • Mon 10 October
    • No Class: Public Holiday (Chong Yeung Festival).

  • Tue 11 October
    • Topic: Financial Crises (Reading & Discussion)

  • Mon 17 & Tue 18 October
    • MidTerm Today
      • Topic: The Financial Crisis of 2008 and its aftermath.
      • You are expected to have read the articles referenced below and to be able to answer questions about their content. You are expected to know basic facts on the housing bubble, on the financial crash, on the great recession, on the bailouts, on fiscal stimulus, quantitative easing, and other policy responses, on the debt-ceiling crisis in the United States, on the sovereign debt crisis in Europe.
    • Reading
      • Charles Himmelberg, Christopher Mayer and Todd Sinai, Assessing High House Prices: Bubbles, Fundamentals and Misperceptions, Journal of Economic Perspectives Volume 19 Number 4, Fall 2005, Pages 67-92 [publisher's link] [local copy]

  • Mon 24 & Tue 25 October
    • Topic: How To Trade Securities: 1. Money Markets
      • Money Markets: You are expected to understand the difference between Treasury Bills, Certificates of Deposit, Commercial Paper, Eurodollars. You are expected to understand the Fed Funds Market, the LIBOR and other Money markets.

  • Mon 31 October & Tue 1 November
    • Topic: How To Trade Securities: 1. Money Markets (continued)

  • Mon 7 & Tue 8 November
    • Topic: How To Trade Securities: 2. Bond Markets
      • Bond Markets: You are expected to understand the difference between the money markets and the bonds markets, the difference between sovereign bonds and corporate bonds, and the principles of inflation-protected bonds.
    • Quiz #1 Today
      • Topic: Money Markets.

  • Mon 14 & Tue 15 November
    • Topic: How To Trade Securities: 2. Bond Markets (continued)

  • Mon 21 & Tue 22 November
    • Topic: How To Trade Securities: 3. Stocks
      • Stocks: You are expected to understand the difference between common stocks and preferred stocks, stock splits, stock indices.
    • Quiz #2 Today
      • Topic: Bonds Markets.

  • Mon 28 & Tue 29 November
    • Topic: How To Trade Securities: 3. Stocks (continued).

  • Mon 5 & Tue 6 December
    • Topic: How To Trade Securities: 4. Derivatives.
      • Derivatives: You are expected to be able to describe the principles of a futures contracts and options contracts.
    • Quiz #3 Today
      • Topic: Stock Markets.

  • Mon 12 & Tue 13 December
    • Expected grades (before make-ups) will be discussed today.
    • Make-Up Tests Today (Midterm & Quizzes)
      • Topic: Money, Bonds, Stocks and the Financial Crisis of 2008.

Timetable

  • Monday 12:30am-3:15pm  :  Nape 3, 9th floor, Classroom D-6
  • Tuesday 12:30am-3:15pm  :  Nape 3, 9th floor, Classroom D-2

Syllabus

Reading

  • The main references for this course are the relevant chapters from the following text:
  • Zvi Bodie, Alex Kane, Alan J. Marcus. Essentials of Investment. McGraw-Hill/Irwin. 9th edition, 2012 or later.
  • Refer to the class syllabus for details.

Materials

  • Handouts will be posted here as they become available. Both slides and companion handouts are available. The handouts are intented for printing. The slides are intended for online viewing. There are some (usually small) differences between the slides and the handout. The handouts may be revised in the course of the semester to fix typos, update data, add or remove material. Some handouts may not yet be available on the website (usually the case if I plan a thorough revision or update).

  • The lectures will be selected from the topics below.
  • [Slides]    [Handout]    Topic :  Financial Crises
  • [Slides]    [Handout]    Topic :  Financial Crises: The Great Depression
  • [Slides]    [Handout]    Topic :  Securities & Financial Instruments: Money Markets
  • [Slides]    [Handout]    Topic :  Securities & Financial Instruments: Bond Markets
  • [Slides]    [Handout]    Topic :  Securities & Financial Instruments: Stock Markets
  • [Slides]    [Handout]    Topic :  Securities & Financial Instruments: Derivatives
  • [Slides]    [Handout]    Topic :  Trading Securities: Mechanisms & Regulation
  • [Slides]    [Handout]    Topic :  Trading Securities: Buying on Margin
  • [Slides]    [Handout]    Topic :  Trading Securities: Short Selling
  • [Slides]    [Handout]    Topic :  Trading Securities: Computing Returns
  • [Slides]    [Handout]    Topic :  Trading Securities: Risk
  • [Slides]    [Handout]    Topic :  Trading Securities: Diversification
  • [Slides]    [Handout]    Topic :  Financial Markets: Banking

  • A selection of short notes are available:
  • [PDF]    Topic :  Securitization
  • [XLS]    Topic :  Margin Purchases Worksheet
  • [PDF]    Topic :  Margin Purchases Worksheet Screenshot
  • [XLS]    Topic :  Short Sales Worksheet
  • [PDF]    Topic :  Short Sales Worksheet Screenshot
  • [XLS]    Topic :  Compounding Worksheet
  • [PDF]    Topic :  Compounding
  • [PDF]    Topic :  Growth Rates Averages
  • [PDF]    Topic :  Growth Rates Comparisons
  • [PDF]    Topic :  Growth Rates Tricks

  • A selection of problems with model answers are available:
  • [Questions]    [Answers]    Topic :  Financial Crises
  • [Questions]    [Answers]    Topic :  Money
  • [Questions]    [Answers]    Topic :  Bonds
  • [Questions]    [Answers]    Topic :  Stocks
  • [Questions]    [Answers]    Topic :  Securities
  • [Questions]    [Answers]    Topic :  Margin Purchases
  • [Questions]    [Answers]    Topic :  Short Selling

  • New Slides and Handouts could be added. Please check back later.

  • The complete list of examinable topics will be given at the end of the semester. Class notes are usually provided in portable document format, pdf. They are not available in any other format.

Grades