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Professional Development

1-0-0 units · Graduate

Required subject that allows students to apply finance concepts to an experiential learning experience. Subject requirements include an experiential learning experience related to their field of study, such as an internship (typically in the summer for at least three weeks in duration) and a written deliverable. Restricted to Master of Finance students in the 18-month program.

Spring 2009 · Practice of Finance: Advanced Corporate Risk Management

This is a course in how corporations make use of the insights and tools of risk management. Most courses on derivatives, futures and options, and financial engineering are taught from the viewpoint of investment bankers and traders in the securities. This course is taught from the point of view of the manufacturing corporation, the utility, the software firm—any potential end-user of derivatives, but not the dealer. Most related courses focus on the extensive taxonomy of instruments and the complex models developed to price them, and on ways to exploit mispricing. While this course will make use of some of these pricing models, the focus is on how corporations use the insights and models to improve their operations, to increase the value of their real assets, or to create the financial flexibility necessary to implement their core strategy.

Readings

  • Brealey, Richard, Stewart Myers, and Franklin Allen. Principles of Corporate Finance . 9th ed. New York, NY: McGraw Hill Higher Education, 2007. ISBN: 9780071266758.
    Listed reading
  • Grinblatt, Mark, and Sheridan Titman. Financial Markets and Corporate Strategy . Boston, MA: McGraw-Hill Irwin, 2001. ISBN: 9780072294330.
    Listed reading
  • McDonald, Robert. Derivatives Markets . Boston, MA: Addison-Wesley, 2005. ISBN: 9780321280305.
    Listed reading
  • Hull, John. Options, Futures, and Other Derivatives . 7th ed. Upper Saddle River, NJ: Prentice Hall, 2008. ISBN: 9780136015864.
    Listed reading
  • The course note chapters are selected from Lecture Notes on Advanced Corporate Financial Risk Management , produced by John E. Parsons and Antonio S. Mello. Used with permission.
    Listed reading
  • Nichols, Nancy A., and Judy Lewent. “Scientific Management at Merck: An Interview with CFO Judy Lewent.” Harvard Business Review , January 1, 1994.
    Listed reading
  • Carter, David A., Daniel A. Rogers, and Betty J. Simkins. “Hedging and Value in the U.S. Airline Industry.” Journal of Applied Corporate Finance 18, no. 4 (2006): 21-33.
    Listed reading
  • Prada, Paolo. “ Fuel Hedges Cloud Airline Results .” Wall Street Journal , October 17, 2008. ↗
    Listed reading
  • Campbell, Alexander. “Flight Plan.” Risk Magazine , May 2008.
    Listed reading
  • Gordon-Walker, Anna. “A Feast of Futures.” Risk Magazine , December 2006.
    Listed reading
  • Davidson, Ryan. “The State of Freight.” Risk Magazine , July 2008.
    Listed reading
  • Chapter 1: Introduction ( PDF ) ↗
    Listed reading
  • Chapter 2: How Companies Manage Risk ( PDF ) ↗
    Listed reading
  • Chapter 3: Why Companies Manage Risk ( PDF ) ↗
    Listed reading
  • Perold, Andre F., Arthur I. Segel, Oliver Corlette, and Soyoun Song. “Grosvenor Group Ltd.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 9-207-064, Rev. October 1, 2007.
    Listed reading
  • Andrén, Niclas, Håkan Jankensgård, and Lars Oxelheim. “Exposure-Based Cash-Flow-at-Risk: An Alternative to VaR for Industrial Companies.” Journal of Applied Corporate Finance 17, no. 3 (2005): 76-86.
    Listed reading
  • Davies, Rob. “Oil and Water Do Mix.” Risk Magazine , June 2008.
    Listed reading
  • Maloney, Peter J. “Managing Currency Exposure: The Case of Western Mining.” Journal of Applied Corporate Finance 2, no. 4 (1990): 29-34.
    Listed reading
  • Jung, Jayne. “Total Control.” Risk Magazine , April 2008.
    Listed reading
  • Davidson, Ryan. “Paying the Dollar Price.” Risk Magazine , August 2008.
    Listed reading
  • Nocera, Joe." Risk Mismanagement ." New York Times Magazine , January 2, 2009. ↗
    Listed reading
  • Almeida, Heitor, and Thomas Phillippon. “Estimating the Risk-Adjusted Costs of Financial Distress.” Journal of Applied Corporate Finance 20, no. 4 (2008): 105-109.
    Listed reading
  • Chapter 6: Measuring Risk—Dynamic Models ( PDF ) ↗
    Listed reading
  • Chapter 9: Pricing Risk ( PDF ) ↗
    Listed reading
  • Tufano, Peter, and Cameron Poetzscher. “Aspen Technology, Inc.: Currency Hedging Review.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 9-296-027, Rev. July 18, 1996.
    Listed reading
  • Mathews, Scott, Vinay Datar, and Blake Johnson. “A Practical Method for Valuing Real Options: The Boeing Approach.” Journal of Applied Corporate Finance 19, no. 2 (2007): 95-104.
    Listed reading
  • Vaidyanathan, Viswanath, Dave Metcalf, and Douglas Martin. “Using Capacity Options to Better Enable Our Factory Ramps.” Intel Technology Journal 9, no. 3 (2005): 185-192.
    Listed reading
  • Nagali, Venu, et. al. “Procurement Risk Management (PRM) at Hewlett-Packard Company.” Interfaces 38, no. 1 (2008): 51-60.
    Listed reading
  • Davis, Anne. “Tyson Foods Refines a Recipe by Energy Firms.” Wall Street Journal , December 1, 2006.
    Listed reading
  • White, Gregory. “Precious Commodity: How Ford’s Big Batch of Rare Metal Led to $1 Billion Write-Off.” Wall Street Journal , February 6, 2002.
    Listed reading
  • Parsons, John E. “Do Trading and Power Operations Mix? The Case of Constellation Energy Group 2008.” MIT Center for Energy and Environmental Policy , Working Paper 0814, November 2008.
    Listed reading
  • Tufano, Peter, and Alberto Moel. “Bidding for Antamina.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 9-297-054, Rev. September 15, 1997.
    Listed reading
  • Mello, Antonio S., and John E. Parsons. “Natural Resource Projects: Debt Contracts that Increase Profits, Decrease Defaults.” e-lab , October 1989-March 1990.
    Listed reading
  • Gold, Russell. “Investment Forecast: On a Roller Coaster, One Energy Firm Tries Hedging Bets; Natural-Gas Giant Chesapeake Has Expanded Rapidly by Locking in its Revenue; Dangers of Guessing Wrong.” Wall Street Journal , November 6, 2006.
    Listed reading
  • “Asset Buyers Gamble On Futures Strip.” Petroleum Intelligence Weekly , July 3, 2006.
    Listed reading
  • Kale, Jayant R., and Husayn Shahrur. “Corporate Leverage and Specialized Investments by Customers and Suppliers.” Journal of Applied Corporate Finance 20, no. 4 (2008): 98-104.
    Listed reading
  • Pinkowitz, Lee, and Rohan Williamson. “What is the Market Value of a Dollar of Corporate Cash?” Journal of Applied Corporate Finance 12, no. 3 (1999): 74-81.
    Listed reading
  • Mello, Antonio S., and John E. Parsons. “Strategic Hedging.” Journal of Applied Corporate Finance 12, no. 3 (1999): 43-54.
    Listed reading
  • Merton, Robert C. “You Have More Capital Than You Think.” Harvard Business Review , November 1, 2005.
    Listed reading
  • Meulbroek, Lisa, and Puja Malhotra. “Risk Management at Apache.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 9-201-113, Rev. August 27, 2001.
    Listed reading
  • Culp, Christopher L., and Merton H. Miller. “Metallgesellschaft and the Economics of Synthetic Storage.” Journal of Applied Corporate Finance 7, no. 4 (1995): 62-76.
    Listed reading
  • Mello, Antonio S., and John E. Parsons. “Maturity Structure of a Hedge Matters: Lessons from the Metallgesellschaft Debacle.” Journal of Applied Corporate Finance 8, no. 1 (1995): 106-121.
    Listed reading
  • Madigan, Peter. “The Sewers of Jefferson County.” Risk Magazine , June 2008.
    Listed reading
  • Tufano, Peter, Geoffrey Verter, and Markus F. Mullarkey. “Cephalon, Inc.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 9-298-116, April 13, 1998.
    Listed reading

Prerequisites & course information

Prereq: None G (IAP, Spring, Summer) 1-0-0 units

Sources