The unit provides an understanding of the finance industry and its integral role in the modern economy. The focus is on a high level, fully integrated overview of the major participants, their roles, interactions and the purpose they endeavour to fill for all stakeholders in the economy. The key structures of the finance system are examined, and how they usually work and sometimes do not work. Case studies of actual events and participants will be used to provide a sense of the application of finance in the real world - what actually happens as well as what should happen.
This unit provides an understanding of the finance industry and its integral role in the modern economy. The focus is on a high level, fully integrated overview of the major participants, their roles, interactions and the purpose they endeavour to fill for all stakeholders in the economy. The key structures of the finance system are examined, and how they usually work and sometimes do not work. Case studies of actual events and participants will be used to provide a sense of the application of finance in the real world – what actually happens as well as what should happen.
This unit provides students with the key building blocks of finance within a single unifying conceptual framework. Students will be introduced to three of the key ideas in finance: the analysis of trade-offs over time, asset valuation and risk management. These concepts will then be applied to the following subfields of finance: corporate finance, investments, and financial markets and institutions.
This unit equips students with financial analysis skills to support advanced study in corporate finance and investment analysis. Emphasis is placed on being able to interpret financial statements in the context of a company’s operational performance and strategy, to assess historical financial performance and to prepare a spreadsheet based financial model capable of forecasting integrated financial statements for a company. After this unit, students should understand the language of financial statements, and be able to use an Annual Report to develop an understanding of a company's historical performance and prospects. Specific topics include the Income Statement, Balance Sheet, Cash Flow Statement and Financial Statement Analysis using Dupont methodology. Financial modelling applications will also be developed, so students will be able to prepare forecasts for the three financial statements, as well as being able to integrate the three statements.
This unit equips students with financial analysis skills to support further study in corporate finance and investment analysis. Emphasis is placed on being able to interpret financial statements in the context of a company’s operational performance and strategy, to critically assess historical financial performance and to prepare a spreadsheet based financial model capable of forecasting integrated financial statements for a company. After this unit, students should be proficient in the language of financial statements, and be highly competent in the use of an Annual Report to develop an understanding of a company’s historical performance and prospects. Specific topics include the Income Statement, Balance Sheet, Cash Flow Statement and Financial Statement Analysis using Dupont methodology. Financial modelling applications will also be developed, so students will be able to prepare forecasts for the three financial statements, as well as being able to integrate the three statements.
This unit provides the important building blocks in microeconomic and quantitative analysis required for advanced study in applied finance. Microeconomic analysis develops tools in demand and supply and critically applies these to the consumer and the firm. It concludes with an analysis of market structure. The second part of the unit develops quantitative skills that are used in finance, including descriptive statistics, probability, statistical inference, correlation, and regression analysis. Spreadsheets are extensively used in statistical modelling.
Corporate Finance is concerned with understanding the link between shareholder value and corporate investment and financing strategies. Students will explore how corporate finance skills can contribute to developing value creating strategies for an organisation. Building on valuation and financial analysis skills from prerequisite courses, the unit explores how to value an organisation, and assess key investment decisions including capital investment projects, mergers, acquisitions and international investments. The impact on value of risk, optionality and strategic choices is also explored. Valuation approaches utilised include a range of Discounted Cash Flow models, Residual Income and Multiples valuation. The unit considers how to develop practical, value creating financing strategies, including the optimal mix of debt and equity, capital management and debt management strategies. Financing strategies in the context of mergers and acquisitions and international investments are also considered. The unit addresses how to calculate cost of capital for companies and projects, and how to incorporate financing impacts into a valuation. Practical issues in the implementation of the shareholder value objective, including the impact of governance strategies, alternative ownership structures and performance measures are considered.
This unit covers the structure, pricing and usage of various financial instruments, including spot, forward, swaps and option contracts for equity, debt, foreign exchange and commodity markets. This unit is concerned with understanding how these financial instruments work, how they are used by end users for speculation and risk management, how they are priced and valued, and how market makers manage their risks when they trade these financial instruments.
Financial Risk Management (FRM) is based on an enterprise risk management framework designed to increase the likelihood that an organisation will achieve its objectives. Unlike traditional, purely defensive approaches to risk, FRM's philosophy focuses on how effective risk management adds value to the organisation. We consider methods for identifying, assessing and treating a variety of risks, with special focus on market, credit, funding liquidity and operational risks. The unit encompasses both quantitative skills and broader human and organisational issues. We encourage students to question the assumptions behind the models, to think about behavioural biases, to identifiy ethical issues, to consider incentives, and to think creatively of risk management solutions. The lectures deliver theoretical and industry relevance by using a case study methodology. Lectures are complemented by online learning activities designed to promote student interaction, engagement and understanding throughout the unit. Assessable pre-unit activities must be completed prior to the first class.
This unit equips students to apply an advanced body of finance knowledge to a range of contexts. The unit commences with an individual investor’s perspective and then progresses to the viewpoint of a professional funds manager. This enables the student to develop the ideas of portfolio theory, asset pricing and behavioural finance. The unit continues with a security analyst’s perspective to address the broad question of how to value enterprises and then drills down to security valuation, financial statement and cash flow analysis. Lastly, we shift the focus to that of a derivatives trader to explore the pricing of forwards and options and employing these derivatives to achieve desired asset allocation exposures. The unit emphasises an applied orientation for the major techniques and themes to be further extended and developed across the Masters program. It represents the essential prerequisite knowledge for all other core units and elective streams.
Students will integrate and apply their knowledge and skills to issues and cases that simulate professional practice in finance. Students will reflect on their roles as practitioners in the finance industry and further develop their professional identity. Critical analysis skills will be utilised to evaluate, synthesise and provide reasoned responses to issues arising in financial practice. Students will undertake research in applied finance and will be challenged to critically reflect on current issues via the preparation and presentation of a major research report. Personal communication, negotiation and collaborative skills will be further developed. This unit will be undertaken towards the end of the program of study.
This unit develops skills required in the assessment and valuation of projects, companies or divisions, and is designed for those with a role in business development, strategic planning or advising companies on financing, investment or restructuring decisions. Students will be equipped to address a wide range of valuation situations by being able to critically evaluate and apply the variety of valuation techniques used in practice. Building on the principles from Corporate Finance we consider in detail the assumptions and implementation issues involved in valuation models, recent developments in cost of capital estimation, valuation methodologies and real options. Valuation in an international context will also be considered. Considerable emphasis is placed on assessing the robustness of valuations and how to incorporate risk into valuation and decision making. The unit provides opportunities to develop financial modelling skills, and provides exposure to @Risk software (used for Monte Carlo simulation), and access to S&P Capital IQ.
This unit will give students a taste of the range of assignments encountered in a career in valuations. The course will be equally useful for those who might commission or use valuations such as company directors, chief financial officers, company secretaries, corporate advisors and equity analysts. The course will equip students to value portfolio and controlling interests in both public and private companies. We will also examine the specific nuances of performing valuations for mergers and acquisitions vs independent expert's reports vs financial reporting vs taxation purposes. The course starts with an overview of the Australian and international standards and regulations that apply to valuations in Australia. We then examine the most common circumstances that give rise to the need for a valuation. Finally, we look at what is involved in giving expert evidence in court. The objective of this unit is to build on valuation skills from Corporate Finance, and present new theory in a practical way through discussion and analysis of case studies that represent real-life situations. Students will have access to S&P Capital IQ.
This unit considers the practical issues of money management. It reviews the major trends currently occurring in the funds management industry and the opportunities observed in financial markets. A significant portion of the unit is devoted to syndicate-style case studies. This provides an opportunity to explore the strategies and techniques employed by successful investment managers.
Formerly known as Managing Shareholder Value (AFCP862).
Using a corporate portfolio review framework, this unit analyses the relationship between resource allocation decisions and shareholder value. It focuses on the following key areas: performance measurement of business units, capital investment and corporate portfolio and restructuring strategies. The unit explores how analytical techniques and key transactions (acquisition, divestments and spin-offs) can be used to implement key corporate strategies. It will also include an analysis of the costs and benefits of diversification strategies. Internal decision making processes, including capital expenditure evaluation and the setting of performance targets and investment criteria, will be examined using a number of perspectives including value based management, behavioural finance, agency models, and remuneration design. This unit will suit students involved in developing corporate and business development strategies, investment and corporate bankers who might advise CFOs on growth and portfolio restructuring strategies, and equity analysts.
A company's financial strategy requires simultaneous decisions about capital structure, dividend and capital management, cash levels, financial risk profile and target credit rating. All of these decisions must be made in the context of the company's operating performance and growth strategies. Taking the CFO perspective, this unit will give students the opportunity to analyse and develop a company's preferred financial strategy. This unit should appeal to those involved in developing financial strategy for corporations, and investment and corporate bankers who might advise CFOs on financial strategy. The unit also addresses issues in: managing external stakeholders, particularly investor relations; risk allocation between various stakeholders; and the role of complex financial structures. Although the unit will take a strategic perspective, students will be able to develop financial modelling skills to support the necessary analysis.
This unit aims to give students an insight into treasury management for non-financial corporations. It will examine cash forecasting and liquidity management, financing, financial risk management and managing relationships with financial institutions, ratings agencies and within the business. We consider the issues confronting the treasurer today and the changing role of treasury in today’s environment. A key focus is how treasury fits within the broader corporation, understanding how and why a corporate treasury differs from financial institutions, how it can add value to the corporation and work to support broader corporate objectives.
This unit will be known as Lending and Borrowing Decisions (AFCP856) from 2018.
This unit examines the way that banks and financial institutions make credit and lending decisions. By understanding the investment goals of a debt stakeholder, we explore the extent to which debt can meet the capital needs of a borrower. We examine how the nature of the borrower (consumer, business or large/listed corporation) influences the approach of lenders and the decision making process. Consumer credit decisioning models are contrasted with the more tailored approach required by much larger individual exposures. Credit scoring and other analytical techniques are explained. The process of formulating a financing or credit proposal is analysed, linking the needs of the borrower and the protections required by the lender. This process includes structuring the credit facilities and documentation using concepts introduced in Financial Risk Management (ECFS868) (viz, probability of default, loss given default and exposure at default). Unsecured, secured and subordinated arrangements as well as “post-decision” matters such as loan monitoring and management of problem loans are also considered as part of the overall lending structure. Finally, the significance of “credit culture”, governance and regulation is highlighted in the context of a large financial institution.
This unit will not be offered in 2018.
In this unit students are exposed to some of the key tools and techniques available for the assessment and management of credit risk in the context of portfolios of loans or other credit exposures. The unit follows on from the credit topics introduced in Financial Risk Management and aims to provide a more in depth understanding of portfolios of credit risk including characteristics such as correlation and concentration risk. Topics cover active credit portfolio management in banks; the regulatory environment; credit derivatives and structured credit (CDOs); and the rapidly developing area of counterparty credit risk.
This unit applies the principles outlined in Portfolio Management and Valuation (AFCP801) and Financial Instruments (ECFS867) to the process of debt capital raisings within Australian, US and Asian markets. The unit aims to provide the student with a perspective on the development of debt capital markets, a theoretical understanding of the issues and a sense of the practical aspects and mechanics of executing a debt capital market transaction. This unit covers all short and term debt markets, securitisation and credit derivatives.
This unit deals with important quantitative issues for derivatives market practitioners. The aim is to extend the student's understanding of derivatives valuation. This unit looks at key numerical techniques and applies them to value exotic, GARCH and interest rate options in cases where classical Black-Scholes assumptions are inappropriate. Teaching uses both lectures and hands-on sessions with computer software.
The aim of this unit is to provide a greater understanding of the role and interaction of economic factors with the financial sector. We utilise topical developments and issues as subject matter. This unit explores the structure and growth of the economy, the determination of interest rates, exchange rates and equity prices, the role of finance, the changing importance of banks, institutional investors and security markets, and the economics of regulation with focus on the Global Financial Crisis and to a lesser extent the Asian Crisis. We also look at topical issues in economics and financial markets, for example, the implications of the surge in Government debt, and the implications for markets of an ageing population.
This unit will only be offered in Beijing in 2018.
This unit covers core methods for the raising and management of equity capital. In particular, students can anticipate completing the unit with a fundamental working practical knowledge of the processes and core theory that is required to conclude a successful IPO or secondary market equity capital raising. The unit also explores a range of capital management techniques, including share buybacks.
Unit will be rested from 2017
This unit is designed as an introduction to a range of classical and
contemporary ethical resources applicable to finance. It will use global
and Australian financial and investment case studies to enable students
to apply these resources and their own ethical experience in practice
and in interaction with others. This unit uses methods of professional
ethics to sharpen students' sense of professional identity and character.
This unit is designed as an introduction to alternative assets and covers the three broad categories of alternative investments, namely ‘real assets’, hedge funds and private equity. The unit examines the basic strategies and techniques within each of these categories, their return and risk characteristics and the potential role they play within an investment portfolio. Alternative assets introduce different risks than traditional assets and so a focus is given to their contribution to liquidity, fees, risk budgeting and factor analysis to help better understand the costs and benefits from a portfolio context. The unit content will also explore the contemporary challenges facing the alternative investments industry, providing context around issues like leverage, fees and regulatory constraints.
Note: ECFS992 has broadened beyond hedge funds to now include the full range of alternative investments, namely real assets, hedge funds and private equity. The unit explores the investment strategies utilised within each category and the role they play in constructing a diversified portfolio.
Unit will be rested from 2017 and replaced with Individual Research Project A and Individual Research Project B
A Student may submit a Research Paper as an alternative to a Unit-work
elective, subject to approval of the Executive Dean. Students complete a
Research Paper of about 10,000 words or of similar substance. For
example, quantitative work may have fewer words but will include other
material. A Research Plan for this Unit must be approved by the
Student's Supervisor and Research Director in order to enrol in the
Unit. Students must have achieved above average results in core units
and Distinction grades or better in related units.
This unit is an alternative to a coursework elective for students with a minimum Credit grade average, and who have completed an elective unit relevant to the area of the research topic prior to enrolment. Two options are available:
Option #1: Identify an industry issue from the field of applied finance, critically analyse its current status, present and critically evaluate possible responses. Students are required to analyse the current state of industry practice, and critically review both the academic and industry relevant literature. Where appropriate, the research project should include a case study or pilot empirical analysis. Successful students will have the opportunity to undertake a more detailed investigation using quantitative analysis, or resolution by developing an analytical or other solution, by enrolling in Individual Research Project B (AFCP866).
Option #2: Produce a business case study, focusing on an applied industry issue and an individual organisation affected by that issue. The case study will be informed by reviewing relevant literature and interviewing industry practitioners, and will cover the current status of the issue and the implications for the organisation. A critical analysis of the issue will be provided by a supporting case study explanatory note. This option will not be recognised as a prerequisite for enrolment in Individual Research Project B (AFCP866).
In Individual Research Project A (AFCP865) Option #1, students will have identified and analysed, in depth, an industry issue. In this unit, students will use problem solving research skills to resolve the issue(s) identified. The research skills can draw on quantitative or statistical techniques, qualitative techniques such as surveys, clinical methods such as case studies or analytical techniques. The research project requires a student to apply research skills and creative problem solving skills, and consider the industry relevance of selected methods. Prior to commencing the research paper, students should have an agreed supervisor, and a work plan approved by the supervisor. Enrolment in this unit is subject to approval by the Program Director of the Master of Applied Finance. This research paper is an alternative to a coursework elective.
This unit focuses on the principles, issues and documentation involved in structuring and arranging finance for property developments and infrastructure projects. It complements Project Finance (ECFS877) by focusing on the application of project financing principles and techniques to property developments and smaller infrastructure projects in non-traditional areas - especially social infrastructure. It examines the structuring and arranging of capital for property developments and in tendering of certain classes of infrastructure projects. It also examines the latest developments in infrastructure delivery methods such as PPPs.
This unit covers the use of advanced financial analysis and modelling techniques in corporate finance applications, and is designed for students interested in analyst roles in equity and credit analysis, banking or consulting environments. Building on concepts introduced in Corporate Finance (ECFS866), this unit complements other Corporate Finance electives. The unit will allow students to explore the linkage between a company's strategy and industry competitive structure, and financial performance. We will analyse financial performance by demonstrating financial analysis techniques, and assess the impact of accounting issues in analysing a company's financial results. The unit will explore how financial modelling can be used to assist in addressing these issues.
New unit offered in 2018.
This elective explores the execution of major corporate and financial transactions, particularly in the areas of Mergers & Acquisitions (M&A) and Equity Capital Markets (ECM). Students will gain a fundamental working practical knowledge of the processes, core theory and market techniques required to conclude successful ECM and M&A transactions. The unit also covers key regulations impacting on major corporate finance transactions, and considers the regulatory environment of major corporate finance transactions. This unit builds on valuation and analysis skills gained in the Corporate Finance (ECFS866) unit and relevant Corporate Finance electives. This unit will appeal to students seeking to enhance their transaction execution and management skills, in either an investment or corporate banking environment, professional services corporate advisory or corporate business development roles.
Note: Students who have completed Equity Capital Markets (ECFS991) and/or Mergers and Acquisitions (ECFS842) are ineligible to enrol in this unit.
Formerly known as Credit and Lending Decisions (AFCP856).
This unit focuses on credit risk from the perspectives of both a lender – taking credit risk – and a borrower – accessing debt capital and other financial services. This dual view allows us to discover how bankers assess default risk, make the decision to lend and structure loans to mitigate key risks, while also building an appreciation of how a business can shape and influence the terms on which debt capital is accessed from bank lenders to meet the borrower’s needs. After a review of how various types of lending products can be matched to borrowers’ requirements, we examine the core concepts of probability of default, loss given default and exposure at default. These concepts inform our discussion of how banks manage credit risks through the structure of the loan balanced against providing workable access to funding for the borrower. The obligations of borrowers under typical corporate loan documentation are discussed, including the practical implications for managing the banker-borrower relationship (from both perspectives) in normal times and when loans are becoming distressed. Finally, the management of credit risk in financial institutions, including the interface with regulators, the governance framework and culture, is presented.
This unit provides an in-depth knowledge of the challenge of understanding the nature of whole of life investing. A framework is developed to model the various risks followed with techniques to solve it whilst addressing the various complexities and uncertainties including longevity, inflation and interaction with age pension. This unit will assist those involved in developing, managing and analysing any investment strategy for whole of life investing, particularly in the accumulation and retirement phases of the superannuation and retirement industry.
This unit will only be offered in Beijing in 2018.
This unit builds on the introduction to mergers and acquisitions in Corporate Finance (ECFS866) including discussion of current trends, valuation techniques, and regulations on corporate control. Statutory rules and market techniques for takeover bids, mergers, schemes of arrangement and other types of corporate restructuring are covered. Other topics include the impact of trade practices and anti-trust regulations, foreign investment regulations, regulations to restrict shareholding levels, accounting for goodwill, due diligence, and post-merger integration and corporate performance. The unit includes a comparative analysis of regulations in Australia and a number of offshore markets.
This unit will not be offered in 2018.
Quantitative modelling is an essential part of modern finance yet models
are often misinterpreted and misused. The aim of this unit is to build
an understanding of modelling techniques for prices in liquid markets
(currencies, commodities, equities). We consider techniques for
analysing the distribution of possible prices over both short and medium
term horizons. Applications will therefore include the risk analysis
of short-term trading and investment portfolios as well as future cash
flows for a project (in non-financial corporations). Model risk is a
focus of this unit, helping students to appreciate the deficiencies of
all models, to make appropriate model selections and to consider the
ethical dimensions of price and risk modelling. You will improve your
modelling abilities and also your capacity to communicate and interpret
complex technical information.
Techniques include simulation analysis, mean reversion models, GARCH
models (for changing volatility), analysis of correlation/co-movement
and heavy-tailed distributions (for modelling extreme events). Case
studies and computer workshops are used in class.
This unit explores the challenges of implementing an operational risk
management program. It builds on the introductory treatment of
operational risk in the unit ECFS868 Financial Risk Management. There is
some treatment of modelling issues, such as Extreme Value Theory for
modelling risk events. However the focus of the unit is on the treatment
of operational risk through analysis and improvement of business
processes, while balancing the need to maintain business efficiency.
Case studies and examples are used to draw out the challenges in risk
treatment/mitigation, obtaining commitment from all staff to risk
processes, and creating effective operational risk systems.
This unit uses the principles developed in Corporate Finance (ECFS866) in the context of private equity investing. The overall structure and dynamics of the industry are discussed and the key issues of assessing, valuing, contracting, monitoring and exiting private equity and venture capital investments are dealt with in detail. This unit covers the full spectrum of private equity investments, from venture (seed and start-up) to management and leveraged buy-outs (late stage).
This unit builds on concepts covered in core units and incorporates the provision of private wealth management advice to investors. Aspects relating to client engagement and retention from the viewpoint of a private wealth manager will be covered and this is also contrasted and applied to other forms of advice delivery such as superannuation funds, SMSF, mass customised advice and robo-advice. A particular focus is on development and delivery of advice for long term investing e.g. saving to fund expenditure in retirement. Aspects of behavioural finance, fiduciary duties and responsibilities, and investment governance as it relates to the private wealth context will also be examined.
Project Finance typically involves an independent legal entity operating as a vehicle for owning and funding large scale projects. Capital sources for the entity will be a combination of equity from sponsors and debt from the bank or capital markets. The application of this financing approach is most commonly seen in the fields of infrastructure (both social and economic) and natural resource financing. Examples include the financing of toll roads, power stations, mines, pipelines, telecommunications networks, hospitals and public buildings such as courts and prisons. This course considers the financial techniques applied to solving such funding requirements in both the domestic and international context, and the business rationale for project finance. A comprehensive risk system is introduced for the identification and systematic allocation of risk in the various approaches to structuring a project financing. Funding, political-risk structuring, and recent capital-market developments are highlighted in class and through practical case studies. A heavy emphasis is placed on the international character of the project finance industry. The skills gained in this course will be relevant for corporate executives, bankers, lawyers, consultants and government officials who may be involved in large scale infrastructure and resource developments.
This unit considers valuation issues that are unique to the minerals and energy industries. This unit is structured around the value chain from exploration through extraction and to the market, and the methods by which resource companies seek to create shareholder value at all of these stages. This unit intends to address two aims. The first is to understand investment decisions that an analyst within a resource company may face; the second is to understand the financial information that resource companies release to the market so that we may compare the performance of resource stocks.
This unit deals with the key issues relating to the building of institutional portfolios. Students will learn how to identify, measure and control various risks within a portfolio. Building on this knowledge the unit examines practical and theoretical aspects in the application of Modern Portfolio Theory (MPT) to the real world. Several extensions of MPT and alternative portfolio construction approaches are also examined. Emphasis is placed on the impact that errors in inputs and incorrect assumptions have on portfolio outcomes. Teaching uses a mixture of lectures and hands-on spreadsheets to illustrate the ideas.
The Global Financial Crisis of 2007-2008 highlighted the dependence of the real economy on the financial sector, and how subtle flaws in bank regulation can result in a failure of the financial system as a whole. One response to the crisis has been more restrictive banking regulation. The effectiveness of this regulation is yet to be seen, however it has made the task of generating returns for bank shareholders significantly more challenging, further compounded by a global economy that has still not fully recovered. This elective will allow students to navigate the new dynamics of the financial system and the objectives of the various stakeholders within that system, and to create management frameworks that work effectively within the complex regulatory constraints on financial firms. The unit investigates the inherent trade-offs in the design of incentives and risk-adjusted performance measures, and guides students to create bank business strategies that can be operationalised via credit concentration limits, delegated authorities etc. This elective also requires students to think critically about the evolution of the banking sector, and how traditional banks might need to adapt to counter the threats posed by disruptive new entrants into the marketplace.
Replacing ECFS882 Exotic Options
Structured products are investment vehicles often designed for investors
to achieve a higher return, or exposure to a particular market, or for
companies to raise funds more cheaply. To achieve this, the end user
will typically take on a higher level of risk and be expressing a
particular market view. Such products are engineered by packaging
standard instruments with derivatives, possibly with exotic features, to
reflect the risk tolerance and market outlook of the user. This unit
introduces the most important types of exotic derivatives, including
digital, average rate and barrier options; path-dependent options such
as cliquet options; and multi-asset options such as basket options. In
each case, we see how these derivatives can be used as building blocks
to construct structured products which enable market participants to
achieve risk-return profiles beyond those provided by standard financial
instruments. As well as construction, we discuss risks and difficulties
experienced in the trading, pricing and management of such products.