Introduction: Specializing Your Financial Expertise
Finance electives in the final year of a BBA program offer students the opportunity to move beyond the core curriculum and explore advanced, specialized topics. These courses are designed to provide in-depth knowledge and practical skills in specific areas of the financial industry, preparing students for careers in fields like investment banking, risk management, financial analysis, and wealth management. The choice of electives allows you to build a unique skill set that aligns with your interests and career goals. Below is an overview of some common and highly valuable finance electives.
Elective 1: Financial Derivatives
This course provides a comprehensive introduction to the world of financial derivatives, which are financial instruments whose value is derived from an underlying asset. Derivatives are widely used for hedging, speculation, and arbitrage.
Module 1: Introduction to Derivatives
- What are Derivatives?: Defining derivative securities and understanding their role in modern finance.
- Types of Derivatives: An overview of the main types of derivatives: Forwards, Futures, Options, and Swaps.
- The Derivatives Market: Differentiating between exchange-traded derivatives and over-the-counter (OTC) derivatives.
Module 2: Futures and Forwards
- Forward Contracts: Understanding the mechanics of forward contracts, their pricing, and their use in hedging.
- Futures Contracts: Exploring the features of futures contracts, including standardization, marking-to-market, and the role of the clearinghouse. We will cover futures on commodities, stock indices, and interest rates.
Module 3: Options
- Option Terminology: Defining key terms like call option, put option, strike price, and expiration date.
- Option Payoffs: Analyzing the profit/loss profiles of basic option positions (long call, short call, long put, short put).
- Option Strategies: Combining different options to create strategies like covered calls, protective puts, and spreads to achieve specific risk-return objectives.
- Option Pricing (The Black-Scholes Model): A brief introduction to the famous model used to price European options, understanding the key factors that determine an option's value (stock price, strike price, volatility, time to expiration, interest rate).
Elective 2: Financial Modeling
This is a highly practical, hands-on course that teaches students how to build financial models from scratch using spreadsheet software like Microsoft Excel. Financial modeling is an essential skill for careers in equity research, investment banking, and corporate finance.
Module 1: Foundations of Financial Modeling
- Best Practices: Learning the principles of building robust, flexible, and user-friendly financial models.
- Advanced Excel Skills: Mastering the Excel functions and tools necessary for financial modeling (e.g., VLOOKUP, INDEX-MATCH, Pivot Tables, Data Tables, Scenario Manager).
Module 2: Building a Three-Statement Model
- Forecasting Financial Statements: The core of the course involves building a fully integrated three-statement model (Income Statement, Balance Sheet, and Cash Flow Statement) for a company based on historical data and assumptions about the future.
- Debt and Interest Schedules: Learning how to model a company's debt and the associated interest expense.
Module 3: Valuation Modeling
- Discounted Cash Flow (DCF) Modeling: Extending the three-statement model to perform a DCF valuation of the company. This involves calculating free cash flow, estimating the weighted average cost of capital (WACC), and determining the company's terminal value.
- Comparable Company Analysis (Comps): Building a model to value a company based on the valuation multiples of its publicly traded peers.
Elective 3: Risk Management
This course focuses on the identification, measurement, and management of financial risks faced by corporations and financial institutions. It provides a framework for making decisions that account for the impact of uncertainty.
Module 1: Introduction to Risk Management
- Types of Financial Risks: Understanding the different categories of risk, including market risk (interest rate risk, equity price risk, currency risk), credit risk, liquidity risk, and operational risk.
- The Risk Management Process: A systematic process involving risk identification, risk assessment, selection of risk management techniques, and implementation and review.
Module 2: Measuring Market Risk
- Value at Risk (VaR): A widely used statistical technique to measure the maximum potential loss that a portfolio could face over a given time horizon at a certain confidence level. We will explore different methods for calculating VaR.
- Stress Testing and Scenario Analysis: Techniques used to assess the impact of extreme market events on a portfolio's value.
Module 3: Managing Credit Risk
- Credit Analysis: The process of evaluating a borrower's ability and willingness to repay debt.
- Credit Scoring Models: Quantitative models used to predict the probability of default.