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Core courses on the MPhil in Finance

Back to MPhil in Finance

Students on the MPhil in Finance programme take six core courses. These are taught at Cambridge Judge Business School unless specified otherwise:

This course studies corporate investment and corporate financing policy. We analyse how firms make investment decisions and how these investments are being financed. We study how a firm’s cost of capital depends on its business and financial risk. We present the main theories of corporate capital structure and discuss their empirical implications.

The course gives an introduction to the valuation of options using the binomial model, and shows how option pricing can be used for the valuation of corporate liabilities and real options.

Topics covered:

  • Capital budgeting with and without debt financing
  • The Adjusted Present Value method (APV) and The after-tax Weighted Average Cost of Capital (WACC) method
  • Corporate capital structure and corporate restructuring: theory and empirical evidence
  • Options and option pricing
  • The valuation of corporate liabilities and real options

This is a graduate-level course and some familiarity with basic concepts of finance as provided in the prerequisite reading is expected.

Asset Pricing examines how securities are priced. From a theoretical point of view we examine models of portfolio choice and how investors allocate their wealth across assets. From an empirical point of view, we discuss the empirical success of those models and the statistical techniques used to do so.

Topics covered include:

  • Utility-based portfolio theory
  • Introduction to cross-sectional asset pricing and CAPM
  • Multifactor models and the conditional CAPM
  • Generalised theory of moments: theory and applications
  • Predicting stock returns, in and out of sample
  • Present value relations and return decompositions
  • Introduction to term structure models
  • The asset pricing of foreign exchange markets

Asset Pricing I requires a strong prior background in microeconomics and statistics/econometrics.

Please work on the assigned summer pre-readings to be announced to the students holding an offer of a place.

Choice of one of the following two courses (however, if you wish to apply to continue to the Cambridge Judge PhD after your MPhil year, you’re required to take both Asset Pricing II and Corporate Finance II, taking one as a core course, and one as an elective):

This course studies a number of topics in empirical corporate finance, including analysing investment decisions, raising capital, takeovers, private equity, venture capital, corporate governance, fraud and other topics. It is research-based, covering the major empirical research papers on these topics.

This course builds upon Asset Pricing I. Asset Pricing II examines how assets are priced in practice and how pricing models are implemented via basic trading strategies.

The course is delivered using lecture slides, Jupyter notebooks, and a free online platform for building and backtesting algorithmic strategies (Quantopian). Some knowledge of Python would be helpful (although not a prerequisite).

Topics covered include:

  • Asset pricing: foundations and quantitative implementation
  • Valuing risk
  • Estimation techniques and model selection
  • Hypothesis testing
  • Small sample inference
  • Modelling, estimating and forecasting volatility
  • Introduction to machine learning

Choice of one of the following two courses:

Taught by the Faculty of Economics.

This course covers the standard economic models of individual decision-making with and without uncertainty, models of consumer behaviour and producer behaviour under perfect competition and the Arrow-Debreu general equilibrium model.

Prerequisites: A basic knowledge of economics and basic level of mathematical sophistication, particularly with respect to optimisation, will be assumed. You should be somewhat familiar with multivariable calculus, basic linear algebra and probability theory.

If your mathematical background is weak, you’ll probably want to do some reading and problems on your own. A good place to start is the mathematical appendix in Mas-Colell, Whinston, Green. Similarly, if you’ve not taken much economics before or want to brush up, you may want to look at an undergraduate microeconomics text. Among the good options are books by Nicholson, and by Pindyck and Rubinfeld.

You are introduced to the foundations necessary to conduct research in the three areas of marketing, operations & technology management, and finance, with a view to developing your own skills as researchers in these areas and in business in general. This course covers standard models of:

  • individual choice under certainty and uncertainty
  • production theory
  • general equilibrium
  • monopoly pricing, price discrimination
  • information economics
  • behavioural economics

The course gives you some fundamental knowledge of competitive markets, enabling you to leverage your course knowledge to do original research and write papers in your chosen field of research in a business school.

Choice of one of the following two courses:

This is the first in the sequence of Econometrics modules designed for Research MPhil students who intend to use econometric methods in their PhD research at Cambridge Judge Business School. It is taught in Michaelmas Term.

This introductory module develops your capability in using linear regression and associated statistical techniques to examine causal relationships from primarily cross-sectional, observational data. By the end of the module you are to specify, estimate, test, interpret, and critically evaluate single equation regression models, with applications in subject areas of management, finance, and business economics.

The module is followed in Lent Term by Econometrics II, training you in methods and applications of Micro-econometrics. A further module on Time Series Econometrics is offered as an elective in Easter Term.

Taught by the Faculty of Economics.

This course examines:

  • Least squares
  • Large sample analysis
  • Maximum likelihood
  • Test procedures
  • Time series
  • Estimation and tests
  • Nonstationary and cointegrated regression
  • Computer packages

Choice of one of the following two courses:

To carry out empirical research that has the potential to make an original contribution to knowledge in management, finance, business economics and similar fields, it is necessary to exploit the richness and structure of longitudinal as well as cross-sectional, individual-level data on the behaviour of individuals or firms. It is necessary to become competent in an array of micro-econometric techniques that help researchers to build into the design of their studies, a variety of complexities (in decision-making, for example) and also compensate for partial observability that is inherent in research data.

This module introduces you to research-level micro-econometric methods. It provides the background required to confidently choose techniques and methods suited to different types of data-sources and models. The focus is on how techniques relate to theory, on the insights that can be drawn from their application, and critical interpretation and appraisal of results.

You must have taken the Econometrics I course to take this course. A further module on Time Series Econometrics is offered as an elective in Easter Term.

A part of this course deals with estimation and inference using both cross-section and panel data. Another part of the course shows how economic and financial time series can be modelled and analysed.