FIE450 Programming with Applications in Finance

• Topics

  FIE450 introduces students into programming based on R and demonstrates several useful applications of R in finance. The course gives students an advantage when pursuing a career in the financial industry.

  Topics that are be covered in this course:

  • principles of programming in R
  • data processing
  • volatility models
  • derivatives pricing
  • portfolio optimization
  • single-factor model
  • performance evaluation

• Learning outcome

  After completing this course, students can:

  Knowledge

  • Understand the principles of programming in R.
  • Recall the principles of single index models.

  Skills

  • Obtain and analyze financial data.
  • Estimate return characteristics.
  • Compute efficient portfolios by means of Markowitz optimization.
  • Estimate index models.
  • Price options by means of Monte-Carlo simulation.
  • Compute risk measures.

  General competence

  • Utilize the obtained programming and modeling skills for solving problems in finance.

• Teaching

  This course is taught using a combination of regular lectures and examples. The lectures are aimed at providing the core information about finance while the lecture examples shall help to comprehend and deepen the understanding of the key ideas of the lecture. The examples shall be worked out and implemented in R by each student individually.

• Required prerequisites

  Successful completion of the course FIE400E(N) or equivalent is required. Basic knowledge in programming.

• Compulsory Activity

  None

• Assessment

  The final grade is based on a portfolio assessment consisting of two group assignments and a reflection note where the student reflects on his/her learning and development. The first assignment tests whether students have adopted principal skills in programming by solving relatively simple finance applications. The feedback on the first assignment is important as it allows students to improve their programming knowledge which they need for the second assignment. There the focus will be on more advanced finance applications. One grade is given for the entire portfolio.

  Each assignment must be answered in English and counts approximately 47.5% towards one final grade. The reflection note counts for approximately 5%. Each group assignment will have an R-code as its delivery and needs to be submitted electronically.

• Grading Scale

  Grading scale: A-F

• Computer tools

  Programming language R.

• Literature

  • Emmanuel Paradies, "R for Beginners", available on cran.r-project.org
  • Longhow Lam, "An Introduction to R", available on cran.r-project.org
  • Bodie Zvi, Alex Kane, and Alan J. Marcus, "Investments", McGraw-Hill, 2014
  • John C. Hull, "Options, Futures and Other Derivatives", Pearson Prentice Hall, 2015