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Finance One Year MBA Major Field Meetings July 11, 2005 Annette Vissing-Jorgensen
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  • 1. Finance One Year MBA Major Field Meetings July 11, 2005 Annette Vissing-Jorgensen

2.

  • This is NOT a marketing school!

3. 4. 5.

  • You can use the Alumni Network to find Kellogg grads:
  • http://kelloggalumni.northwestern.edu/Directory/BasicSearch.asp
  • 160 at Merrill Lynch
  • 118 at Morgan Stanley
  • 94 at Lehman Brothers
  • 73 at Citigroup
  • 63 at Goldman, Sachs & Co.
  • 59 at JP Morgan Chase
  • 45 at HSBC
  • 38 at Deutsche Bank

6. Outline of Todays Talk

  • Two Branches of Finance
    • Capital Markets / Investments
    • Corporate Finance
    • Careers Within Each Branch
  • Major Requirements
    • Finance Major
    • Analytical Finance Major
  • Classes

7. Capital Markets/Investments

  • Perspective: The investors portfolio
  • Key issues:
    • Expected rates of return
      • Beta and the Capital Asset Pricing Model
      • Multi-factor models
    • Measuring risk
      • Variances and covariances
      • Short-run risk, long-run risk
    • Security Pricing (stock, bonds, derivatives)

8. Corporate Finance

  • Perspective: The firm
  • Which projects to pick?
    • Capital Budgeting: Valuing investment projects
    • Net present value, real options
  • How to finance them?
    • Capital structure: Debt versus equity
    • Risk Management
  • What to do with the profits?
    • Dividend policy: Dividends/share repurchases/retained earnings

9. Careers

  • Capital Markets
  • Money Management (buy side)
    • Pension funds
    • Mutual funds
    • Hedge funds
  • Research, Sales and Trading (sell side)
    • Security analysis
    • Design securities to manage risks
    • Market making
  • Corporate Finance
  • Management
    • Finance Department
    • General Management
  • Investment/commercial banking
    • Raising Capital
    • Mergers and Acquisitions
    • Corporate Clients
  • Consulting
    • Strategic
    • Valuation
    • Managerial performance evaluation/compensation

10. Finance @ Kellogg 11. Major Requirements

  • Finance Major
  • Analytical Finance Major
  • Both majors build on knowledge from FIN 440 (Turbo)

12. Finance Major

  • FIN 440 (Turbo) (or Finance I &Finance II)
  • One capital market course from list F
  • 2 additional courses

13. Analytical Finance Major

  • FIN 440 (Turbo) (or Finance I &Finance II)
  • Derivative Markets I
  • 3 courses from List A
  • Practicum

14. Classes

  • Capital Markets
    • Derivative Markets IF (A)
    • Derivative Markets IIF A
    • InvestmentsF A
    • Fixed Income SecuritiesF A
    • International FinanceF
    • Money Markets & the FedF
    • Emerging Markets
    • Securitization
  • Corporate Finance
    • Financial DecisionsA
    • Fin. Strategy & TaxesA
    • Entrepreneurial Finance
    • Venture Capital and Private Equity Investing
    • Real Options
    • Investment Banking
    • Corporate Restructuring
    • Mergers and Acquisitions
    • Security Analysis

15. Practicum in Analytical Finance FINC-925

  • The focus of the course this year will be Value Investing.
  • First half: (a) formal lectures, (b) in class valuation discussions, (c) presentations by leading value investors.
  • Second half: Students will (i) design strategies for efficiently searching for value investing strategies, and (ii) identify an interesting value investing opportunity, in groups.
  • The course uses large data bases of returns data. You will learn to use STATA to analyze strategies.
  • Each group will make a final presentation on (i) and (ii).A couple of leading value investors to be present during the final presentation.
  • http://www.kellogg.northwestern.edu/faculty/jagannathan/ teaching/practicum/2005/index.htm

16. Notice

  • Flexibility:
    • You can target your courses to your career plans
  • Its not all math!
    • Cases do appear
  • New course in the works for Winter 2006 (Hochberg):
  • ``Cases in Venture Investing and Management
    • Evaluating business opportunities and assessing VC investments
    • Based on a series of cases
    • Will revolve around presentations by the venture capitalists and entrepreneurs involved in the cases!!!
    • 5/5 ratings when taught at Cornell

17. Course Recommendations by Career: 18. More Information: Finance Department Web Page http://www.kellogg.northwestern.edu/finance/index.htm

  • Course recommendations by career
  • Course offerings, descriptions
  • Some course page links (see also Professors own web pages for links)
  • Professors
      • Email addresses
      • Biographical information
      • Research interests

19. Questions ? 20. Financial Decisions FINC-442

  • Usescase studiesto enhance the student's understanding of managerial financial decision making, specifically investment and financing decisions.
  • Topicsinclude short- and long-term financing, capital structure and dividend decisions, cost of capital, capital budgeting, firm valuation, financial and operational restructuring, and mergers and acquisitions .
  • The course issufficiently general so as to be of interest to all students.It provides students with the opportunity to apply the concepts and theories developed in other finance courses.
  • At its most fundamental level, the course attempts to improve problem-solving skills:problem definition, gathering and organizing the relevant information, developing feasible alternative courses of action, evaluating alternative choices, and recommending and defending the best course of action.

21. Entrepreneurial Finance FINC-446

  • This course teaches studentshow to become an entrepreneur by focusing on financial aspects.
  • Topics includepro forma development and review, business valuation models, cash flow analysis and raising capital from private investors, venture capitalists and banks.
  • The course is taught using thecase methodprocess ("real life" case studies). Periodically, technical notes will be used and guests invited to augment subjects addressed. This is not a quantitative analysis course. Rather, it focuses on marketing, sales, management and strategic planning.

22. International Finance INTL-470

  • Managing an international business or one exposed to global competition requires an understanding ofinternational financial instruments, markets and institutions.This course seeks to provide students with a working knowledge of these issues.
  • Topics include the nature offoreign exchange risk;the determination ofexchange rates and interest rates ; the management of foreign exchange risk with forwards, options and swaps; exchange rate forecasting; the anatomy ofcurrency speculative attacks ; and the dynamics of the balance of payments with a focus on understandinginternational capital flows, country debt and exchange rate fluctuations.

23. Investments FINC-460

  • This course is a comprehensive study ofinvestment theory from the perspective of plan sponsors and portfolio managers.
  • Emphasis is onoptimal portfolio construction and portfolio performance evaluationusing modern portfolio theory and asset-pricing models.
  • Topics includeequity valuation ,benchmark tracking ,transactions costs ,term structureof interest rates and bonds,use of derivativesin index fund management and hedge fund strategies.

24. Money Markets and the FedFINC-451

  • This course covers two aspects ofmoney markets : financialinstitutions , and financialinstruments .
  • In the first half of the course, thelinkages between the financial system and the macro-economyare studied includinginterest rate determination, the role of the Federal Reserveand the conduct of monetary policy.
  • The second half of the course provides an overview of the instruments of the money market:Federal Funds, Commercial Paper, Treasury Bills, etc.Basic valuation and hedging techniques in short term futures and swaps are also covered.

25. Derivatives Markets I, FINC-465

  • This course covers theuse and pricing of forwards and futures, swaps and options.
  • Specific topics includestrategies for speculation and risk management , no-arbitrage pricing for forward contracts, the binomial and Black-Scholes option pricing models and applications of pricing models in other contexts.

26. Have fun! 27. Finance I FINC 430

  • Introduction to the concepts and techniques necessary to analyze and implement optimal investment decisions.
  • Topics include
    • basic discounting techniques
    • stock and bond valuation
    • capital budgeting under certainty and uncertainty
    • asset pricing models
    • market efficiency

28. FIN IIFINC 441 The role of thefinancialmanager Valuations and investmentdecisions Dividenddecisions Financingdecisions RiskManagementand Hedging Return rate should beappropriate Cash flowsappropriatelycomputed How much? What form? Identifycosts andbenefits of eachfinancinginstrument Choose theoptimal mix Identify whichrisks should be hedged Findthe appropriateinstruments 29. Options for First Years

  • Option 1: Take Required Classes
    • Finance I and Finance II
    • or Finance I/II (Turbo) (condensate Fin I and Fin II in one class)
  • Option 2:
    • Waive Finance I. Take Finance II.
  • Option 3:
    • Waive Finance I and Finance II