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16:960:583
Statistical Methods of Inference (3)
Statistical theory of inference follows the introduction to probability theory and emphasizes the fundamental concepts and underlying theories of point and interval estimation and hypothesis testing. Topics include sufficiency, unbiasedness, Bayes methods, and power function.
Prerequisite: 16:960:582.
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22:223:520
Aggregate Economic Analysis - FT (3)
Introduces theory and empirical estimation of aggregate economic relationships, including the general price level, income, output, employment, and wages. Covers national income accounting and other economic data sources, consumption, investment, the banking system, and the supply of and demand for money, interest rates, prices, wages and employment, business fluctuations, and international economics.
Prerequisite: Managerial Economic Analysis (22:223:521 (FT)/22:223:581 (PT)). Sample Syllabus. This course is a prerequisite to all finance electives. However, students may take Aggregate Economic Analysis during the same semester as their first finance elective.
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22:223:521
Managerial Economic Analysis - FT (3)
Introduces the aspects of economics that are most relevant to the operation of the individual firm or nonprofit organization. Covers theory of individual economic behavior, demand theory and demand estimation, cost and supply, price determination, production decisions, and industry structure.
Prerequisite: Proficiency requirements.
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26:223:552
Microeconomic Theory (3)
Surveys and applies elements of marginal analysis, capital theory, utility, and risk analysis to problems in demand analysis, production, cost and distribution, market structure and pricing, and capital budgeting.
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26:223:553
Macroeconomic Theory (3)
Models, with attention to empirical work, of aggregate demand and supply and their components, i.e., investments and consumption; supply and demand for money and other financial assets; and capital and labor markets. Determinants of the price level and of inflation; rates of interest, employment, and income; and international macroeconomic relations. Reviews major issues in the evaluation of monetary policy.
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22:223:581
Managerial Economic Analysis (3)
Introduces the aspects of economics that are most relevant to the operation of the individual firm or nonprofit organization. Covers theory of individual economic behavior, demand theory and demand estimation, cost and supply, price determination, production decisions, and industry structure.
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22:223:591
Aggregate Economic Analysis (3)
Introduces theory and empirical estimation of aggregate economic relationships, including the general price level, income, output, employment, and wages. Covers national income accounting and other economic data sources, consumption, investment, the banking system and the supply of and demand for money, interest rates, prices, wages and employment, business fluctuations, and international economics.
Prerequisites: Fulfillment of calculus/statistics qualifying requirement and Managerial Economic Analysis (22:223:581) are recommended.
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22:223:607
Pharmaceutical Industry: Issues, Structure, and Dynamics (3)
This course contains weekly presentations by pharmaceutical industry professionals on topics relevant to the biopharmaceutical industry. The topics include drug approval process, FDA's relationship with the industry, pricing strategies, intellectual property and patents, genomics, licensing and partnering, market structure, mergers and acquisitions, and others. Students are evaluated based on three equally weighted papers of their choice.
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22:373:621
Legal, Regulatory, and Ethical Issues in the Pharmaceutical Industry (3)
This course will help aspiring executives in the pharmaceutical firms to develop the knowledge, skills, and ethical compass to succeed in this environment. The topics covered include research ethics, bioethics, intellectual property, health care reform, and drug marketing. This course exposes students to a diversity of perspectives from academic and industry points of view. It uses Harvard Business School cases that give students opportunities to learn by making executive-level decisions in real-world business context. Students will be expected to (1) participate actively in the case studies, (2) complete three written assignments of 5-8 pages, and (3) participate in one end-of-semester group presentation on a timely topic in drug policy.
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26:390:571
Investments (3)
Surveys the fundamental assumptions and the analytical techniques of the modern theory of finance. Topics include choices involving risk using utility theory and state preference, portfolio selection, capital market equilibrium and its implications for corporate finance and portfolio selections, and option theory.
Prerequisites: 26:223:552 and 26:960:577.
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26:390:572
Corporate Finance (3)
Basic knowledge of theoretical and empirical model building in the area of corporate finance.
Prerequisite: 26:390:571.
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22:390:587
Financial Management (3)
Provides a general survey of the field, including the basic principles of corporate finance, financial markets and institutions, and investment theory. Corporate finance topics covered include the objective of financial management, valuation of assets and associated problems in the valuation of the firm, acquisition of long trimester assets (capital budgeting), management of short-trimester assets, capital structure, and financial statement analysis. Financial markets and institutions studied include money markets, stock and bond markets, derivatives, and the banking system. Investment analysis topics include portfolio theory and asset pricing models.
Prerequisite: Financial Management (22:390:522).
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22:390:601
Corporate Risk Management (3)
Provides a survey of the current practices of businesses in protecting themselves from chance events that threaten their assets or their operations. Options ranging from risk preparation to transfer of risk to others, such as suppliers, are considered.
Prerequisites: Aggregate Economic Analysis (22:223:520 (FT)/22:223:591 (PT)), Financial Management (22:390:522 (FT)/22:390:587 (PT)).
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22:390:603
Investment Analysis and Management (3)
Provides an overview of the fields of security analysis and portfolio management. Introduces the analysis of individual investments with special reference to common stocks and bonds. Designed for the finance major who is interested in the security/investment area as a possible career.
Prerequisites: Aggregate Economic Analysis (22:223:520 (FT)/22:223:591 (PT)), Financial Management (22:390:522 (FT)/22:390:587 (PT)).
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22:390:604
Financial Institutions and Markets (3)
Presents a detailed overview of the theory and institutional features of the U.S. financial system. Provides a comprehensive review of U.S. financial markets. Covers a survey of flow-of-funds data and U.S. financial markets and institutions, capital market theory, financial factors and economic activity, theory of the level and structure of interest rates.
Prerequisites: Aggregate Economic Analysis (22:223:520 (FT)/22:223:591 (PT)), Financial Management (22:390:522 (FT)/22:390:587 (PT)).
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22:390:605
Advanced Financial Management (3)
Examines the problems faced by the corporate financial manager on the theoretical, analytical, and applied levels. The impact of the financing decision upon the value of the firm is analyzed. Theoretical and analytical aspects of the capital budgeting decision are examined in detail with emphasis on methods of incorporating risk into the capital budgeting decision. An analytical framework is presented to evaluate leasing, bond refunding, and mergers and acquisitions. Theories of corporate governance are discussed.
Prerequisites: Aggregate Economic Analysis (22:223:520 (FT)/ 2:223:591 (PT)), Financial Management (22:390:522 (FT)/22:390:587 (PT)).
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22:390:606
International Financial Markets (3)
Offers an understanding of the international financial structure and studies its impact on business and individuals in various nations. The course is divided into three parts: the study of the adjustment mechanism used by nations to solve balance of payments difficulties; the examination of international liquidity and the new techniques being developed to replace gold; and a brief look at the implications of these developments in guiding the international operations of banks, other financial institutions, and business firms.
Prerequisites: Aggregate Economic Analysis (22:223:520 (FT)/22:223:591 (PT)), Financial Management (22:390:522 (FT)/22:390:587 (PT)).
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22:390:608
Portfolio Management (3)
Students taking this course should expect to learn about financial decision-making from an investor's perspective. The course will focus on the fundamental principles of risk and return, diversification, and asset allocation. Students will learn about investment strategies commonly used by mutual funds and hedge funds, as well as how to evaluate a portfolio manager's performance. There are two goals for the course. First, to provide students with a framework they can apply to help break down and understand complicated investment strategies that are commonly used by investment managers. Second, to provide students with the technical skills necessary for a career in portfolio management. Both sets of skills will be developed through case studies, homework assignments, lectures, and discussions.
Prerequisites: 223:581 or 223:521; 223:591 or 223:520; 390:587 or 390:522; and 390:603.
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22:390:609
Options/Derivatives (3)
The purpose of this course is to provide students with the necessary knowledge on how to use and not to use the models for derivatives. While the course will primarily focus on payoffs, usage, pricing, hedging, and institutional details of the most fundamental or vanilla versions of options and futures, it will also deal in some detail with more recent studies in the theory of derivative pricing. Students will acquire a robust conceptual knowledge of the fundamental issues that determine the valuation and behavior of these instruments. Though this course focuses on the intuitive economic insights of those models, some advanced math is required, including stochastic calculus. Be prepared for some necessarily nontrivial math if you take the course.
Prerequisites: Aggregate Economic Analysis (22:223:520 (FT)/22:223:591 (PT)), Financial Management (22:390:522 (FT)/22:390:587 (PT)).
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22:390:611
Analysis of Fixed-Income Securities (3)
Explores the investment characteristics, pricing, and risk/reward potential of fixed-income securities. The securities covered include bonds---with and without embedded options; mortgages and mortgage-backed securities together with their derivatives such as collateralized mortgage obligations (CMO's), income-only (IO's) and principal-only (PO's) strips; interest rate swaps; and interest rate futures and option contracts. In addition, this course will explore the strategies for investing in portfolios of fixed-income securities.
Prerequisites: Aggregate Economic Analysis (22:223:520 (FT)/22:223:591 (PT)), Financial Management (22:390:522 (FT)/22:390:587 (PT)).
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22:390:612
Small Business Finance (3)
The financing problems that face a new and/or small business can be broken into financial planning, valuing, and raising capital. While these topics were discussed in other courses, they form the main portion of this course, which is designed for those planning to start a business or take over an existing business. It will also be beneficial for those planning careers that must interact with small or new business (e.g., banking, insurance, etc.).
Prerequisite: 22:390:587.
Corequisite: 22:223:591.
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22:390:613
Financial Statement Analysis (3)
Presents techniques for analyzing a firm's current and projected financial statements for the purposes of credit analysis, security analysis, and internal financial analysis. Topics covered include financial distress prediction, evaluation of short-term and long-term loan requests, the impact of accounting information on security returns, determinants of bond ratings and yields, and the reliability of historical and forecasted accounting data. A working knowledge of spreadsheet analysis is expected. Special emphasis is placed on acquiring data from printed and computer databases and an introduction to specialized online databases and the Internet.
Prerequisites: Aggregate Economic Analysis (22:223:520 (FT)/22:223:591 (PT)), Financial Management (22:390:522 (FT)/22:390:587 (PT)), Accounting for Managers (22:010:502 (FT)/22:010:577 (PT)).
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22:390:622
U.S. Health Care System and Pharmaceutical Managed Markets (3)
The health care industry in the United States is one of the most controversial and changing systems in the global economy. In recent years it has transformed into a conglomerate of public and private entities; each with its own agenda, funding sources, and place in the market. Topics of discussion will include characteristics of the health care system, public/private sector roles, health care markets, managed care impact, congressional proposals, health policy changes, health care reform strategies, and the role of patients/consumers. The primary focus of this course will be how these influences relate to the business of pharmaceuticals.
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22:390:641-689
Special Topics Courses (3 each)
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22:390:659
Health Care Finance (3)
This course is designed with an emphasis on applications of analytical tools in health care organizations. Combinations of lectures and discussions on different topics important to health care finance will enable students to develop analytical skills necessary to solve a variety of financial management problems. After completing this course, students should be able to analyze investment decisions; evaluate different sources of financing projects; analyze cost of capital; understand the issues of reimbursements including physician payments, capitated payments, and fee-for-service payments; differences between for-profit and nonprofit organizations; taxable and tax-exempt bond issues and their impact on the supply of charity care by nonprofit hospitals; and the operations of physicians' practice.
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22:390:697
Entrepreneurial Finance for Fashion and Beauty Industries (3)
Entrepreneurial Finance for Fashion and Beauty Industries is a course designed for students who plan to get engaged in working with a high-growth venture. The course focuses on financing of new ventures that are expected to grow and in which students may take a role of an entrepreneur, an adviser, an investor, or an employee. The course is created to expose students to the basic problems that are specific to financing new and growing ventures such as design of a business plan, contracting and valuation, choice of seed and follow-up financing, and financing venture's growth. The course also offers a basic coverage of venture capital and angel investors as well as a number of guest lectures from the fashion industry.
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22:839:510
Numerical Analysis (3)
This course derives, analyzes, and applies methods used to solve numerical problems with computers; solution of linear and nonlinear algebraic equations by iterations, linear equations, and matrices, least squares, interpolation, and approximation of functions, numerical differentiation and integration, and numerical solutions of ordinary differential equations.
Spring semester only.
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22:839:571
Financial Modeling I (3)
This is a quantitatively oriented financial economics course for the master of quantitative finance (M.Q.F.) students. The course covers the basic concepts and analytical techniques of modern portfolio theory and asset pricing. Topics include Fisher separation, risk analysis using expected utility theory, mean-variance analysis, capital asset pricing model, arbitrage pricing theory, state preference theory, consumption-based asset pricing, market efficiency, and empirical tests of asset pricing models.
Spring semester only.
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22:839:614
Object-Oriented Programming in Finance I (3)
The goal of this yearlong sequence of courses is to give a rigorous introduction to computer programming and software engineering with special emphasis on applications to financial engineering. Our primary programming language will be C++. This programming language is fast enough to accommodate the performance demanded in financial environments. At the same time C++ is an object-oriented language and, as such, is suitable for modern software design. In this course the assumption is that students have had no background in computer programming, although even people who are familiar with some programming language will hopefully benefit and learn new material. In part I in the fall semester the course will start with basic concepts of programming, but we quickly get into topics in object-oriented programming, UML diagrams, and basic patterns. We will also include introduction to basic algorithms and data structures. In part II in the spring semester, more advanced topics will be covered, including advanced algorithms and data structures especially through introduction to STL and boost libraries, numerical algorithms and introduction to BLAS and LAPACK libraries, design of graphical user interfaces, and concurrent programming (also known as multiprogramming).
Fall semester only.
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22:839:615
Object-Oriented Programming in Finance II (3)
The goal of this yearlong sequence of courses is to give a rigorous introduction to computer programming and software engineering with special emphasis on applications to financial engineering. Our primary programming language will be C++. This programming language is fast enough to accommodate the performance demanded in financial environments. At the same time C++ is an object-oriented language and, as such, is suitable for modern software design. In this course the assumption is that students have had no background in computer programming, although even people who are familiar with some programming language will hopefully benefit and learn new material. In part I in the fall semester the course will start with basic concepts of programming, but we quickly get into topics in object-oriented programming, UML diagrams, and basic patterns. We will also include introduction to basic algorithms and data structures. In part II in the spring semester, more advanced topics will be covered, including advanced algorithms and data structures especially through introduction to STL and boost libraries, numerical algorithms and introduction to BLAS and LAPACK libraries, design of graphical user interfaces, and concurrent programming (also known as multiprogramming).
Spring semester only.
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22:839:662
Financial Modeling II (3)
This course covers continuous time finance, similar to an advanced Ph.D. course in asset pricing. It follows Financial Modeling I, which covers discrete time finance and continues with continuous time financial theories. Topic-wise, it covers basic theories (backward and forward equations, change of measure, state pricing, arbitrage pricing, martingales); derivatives pricing (Black-Scholes model, Heston model, Geske model, Merton-Rabinovitch model); term structure of interest rates (Vasicek model, CIR model, HJM model, Hull-White model); multifactor models (Chen-Scott model, Bakshi-Cao-Chen-Scott model, Duffie-Pan-Singleton model); credit derivatives (Jarrow-Turnbull model, Duffie-Singleton model); and some numerical methods (binomial model, finite difference methods, Monte-Carlo). Interested students can get a good idea from the following books: Merton: Continuous Time Finance; Duffie: Dynamic Asset Pricing Theory; Ingersol: Theory of Financial Decision Making; and similar others.
Fall semester only. Prerequisites: Financial Modeling I (22:839:571) and Stochastic Calculus for Finance (26:711:563).
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26:223:554
Econometrics Cross Sectional (3)
This is a Ph.D. course in the applied econometrics of cross-section and panel data. The course will provide students with a working knowledge of asymptotic statistical methods and the application of these statistical concepts to study large-sample properties of estimators (defined as the solution to an optimization problem, under various assumptions regarding the true data generating process). The large sample results will be applied to linear and nonlinear (in parameters) generalized least squares (GLS) and maximum likelihood (ML) estimators. These results are extended to develop a nonlinear instrumental variables estimator; the generalized method of moments (GMM) and various asymptotic testing procedures are derived for this general modeling framework. Instrumental variables, panel data, simultaneous equations, discrete dependent, limited dependent and duration models, dynamic panel models, and their applications are covered.
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26:223:655
Econometrics Time Series (3)
This course has a broad structure and covers many aspects of modeling and estimating financial/economic time series. In particular, we will be focusing on (i) linear regression models involving variables observed over time and (ii) "pure" univariate and multivariate time-series models. The objective is that participants gain a thorough understanding of the theory underlying time-series econometrics, which is the basis for any empirical time-series analysis of financial/economic market phenomena. The course places a particular emphasis on clearly identifying which econometric methods are appropriate under which scenarios. Estimation techniques covered will be Ordinary Least Squares (OLS) and Generalized Method of Moments (GMM).
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26:960:580
Applied Stochastic Processes (3)
The course covers the theory and modeling of stochastic processes. Topics include martingales, stopping theorems, elements of large deviations theory, Renewal Theory, Markov Chains, Semi-Markov Chains, Markovian Decision Processes. In addition, the class will cover some applications to finance theory, insurance, queueing, and inventory models.
Fall semester only.
Prerequisites: This course requires a strong understanding of probability. Students lacking a background in probability should take Probability (26:960:575) before taking this class.
Stochastic Calculus for Finance (26:711:563) and Stochastic Processes (26:960:580) are substitutable core courses. If a student takes one of them as a core course, the student can take the other as an elective.
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Course List and Descriptions 
