Quantitative Financial Methods

This module is aimed at introducing mathematical and statistical techniques in financial analysis with practice in the use of relevant computer software as developed in the common practice of investment portfolio theory. The objective is to familiarize students with the analytical language of financial analysis as well as acquaint them with current trends in the literature of quantitative financial methods. The module represents the standard statistical concepts of estimation, hypothesis testingand regression analyis, involving tome series and cros-sectional data, through the use of financial IT packages.

Optional

Knowledge of intermediate accounting, statistics or econometrics

None

• Introductory financial analysis-corporate financial statements, ratio analysis
• Value of time: annuities and perpetuities with Islamic implications
• Security valuation models: bonds, preferred and common stocks
• Models of capital budgeting
• Risk Pricing-the CAPM and the Efficiency Market Hypothesis
• Portfolio risk management- measuring portfolio performance
•  Arbitrage Pricing-theory and applications
•  Financial derivatives: theory and applications Financial analysis in interest-free markets

Knowledge and Understanding

On successful completion of the module students should be able to:

1. Develop basic knowledge on the applications of modern investment portfolio theory, its basic assumptions and critique.
2. Understand the principles and techniques of financial analysis.
3. Recognise various models and estimation methods in modern finance.
4. Examine current developments in the literature on financial analysis and risk assessment.
5. Ability to contribute to the current dialogue on the financial methods suitable for Islamic financial systems. 

Skills

By the end of this module students should have developed skills in:

1. The analysis of corporate financial statements using standard techniques
2. Assessing investment portfolios in terms of time, risk and cash flow
3. Using financial computer packages in the analysis of investment data
4. Formulating testable hypothesis about the performance of financial markets
5. Accessing up-to-date literature and advances in current financial analytical techniques
6. Structuring and valuation of marketable bonds and equities
7. Preparing clear well-organised and planned financial reports

Each student should participate in 150 hours of effort, including Lectures (6 hours), Seminars (9 hours), Tutorials (3 hours), and guided personal study amounting to 132 hours in all.

One essay of 5,000 words                                                                         60%

Classroom test of basic concepts, mainly multiple choice questions/answers    10%

Examination                                                                                            30%

1. Bealey, R.A., (1983) An Introduction to Risk and Return from Common Stocks, Basil Blackwell.

2. Blake, David, (2000) Financial Market Analysis, John Wily and Sons Ltd.

3. Chapra, Umar and Habib Ahmed, (2002) Corporate Governance in Islamic Financial Institutions, IRTI, IDB, Jeddah.

4. Das, Satyajit, (2007) Structured Products and Hybrid Securities, John Wily and Sons (Asia), Pte, Ltd.

5. Elton, Edwin J. and Martin J. Gruber, (1995) Modern Portfolio Theory and Investment Analysis, John Wily and Sons Inc.

6. Fabozzi, Frank J, (ed.), (2002) Financial Instruments, John Wily and Sons Inc.

7. Glantz, Morton, (2003) Managing Banking Risk: An Introduction to Broad-Based Credit Engineering, Academic