NYU Stern

Foundations of Finance

Downloadable Materials The Quiz Page Portfolio Assignment Benchmark Portfolio Giddy's Resource Page

Prof. Ian Giddy
E-mail: ian.giddy@nyu.edu Web: http://giddy.org/
Course Web site: http://www.stern.nyu.edu/~igiddy/finance.htm

Students taking this course should expect to learn the nature and workings of financial markets and their use by corporations, investors and others.They will acquire some skills in modern valuation techniques, including the pricing of fixed-income securities, equities, foreign exchange and derivatives. They will learn about the principles of finance, including arbitrage, market efficiency, and portfolio theory. In the context of corporate finance, the course will introduce the key principles of selecting real investments, financing them, and managing financial risk. From the point of view of investors, individual as well as institutional, we will consider the principles of portfolio selection and management. Finally, the course will look at how banks and other financial institutions make money by bringing issuers and investors together.

Prof. Ian Giddy is a graduate of the University of Michigan (MBA 1972, PhD 1974) and the University of the Witwatersrand (BSc 1970). He has taught finance at NYU, Columbia, Wharton, Chicago and abroad for the past twenty-six years. He was Director of International Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. He is the author or co-author of numerous articles and books, including The Handbook of International Finance, The International Money Market, Cases in International Finance, Global Financial Markets, Asset Securitization in Asia and The Hudson River Watertrail Guide.

The course employs cases and problems as well as classroom lectures and discussions, and a portfolio management simulation to offer a hands-on learning experience. We will make use of international as well as domestic examples. Each student will be expected to prepare thoroughly and to participate actively in class discussion. There will be a midterm and a final exam.

The Course on the Internet
We will make use of the Internet for resource material and communication. Indeed this course outline itself will change: the definitive version is the Web site at http://www.stern.nyu.edu/~igiddy/finance.htm. All students must have an email address and Web access. Your default address will be the one assigned by the Stern School. Lecture materials, as available, can be downloaded from the Web.

Bodie, Kane and Marcus, Essentials of Investments,
Bodie, Kane and Marcus, Essentials of Investments, Solution Guide
Ross, Westerfield and Jordan, Fundamentals of Corporate Finance, Special Package
Additional readings will be made available in a readings package or for download from the "Course Materials" Web site, http://www.stern.nyu.edu/~igiddy/finmat.htm.

Students should have read the assignments before coming to class. Material covered in the assigned textbook readings will generally not be repeated in class. Rather, class time will be devoted to lecture and case discussion, applying the material covered in the readings.

There will be a midterm and a final examination.

Problem Sets
A number of self-test problem sets, and three timed quizzes, based on the end-of-chapter questions, will be made available on the Web at The Quiz Page (see link at the top of this page). Your ID and password will be given out in class, or email me with your name and social security number at ian.giddy@nyu.edu

Portfolio Management Game
Each student will manage a hypothetical portfolio of bonds and/or equities during the course. Selections must be made by the day after the second class and emailed to the instructor. The goal will be to beat a passive $500,000 portfolio of 40% bonds, 50% equities, and 10% cash. Students will apply the concepts learned in the course to select which bonds and stocks to buy and which to sell, and to evaluate the relative performance of the portfolio. Students must sign up at StockTrak to manage their portfolios. For more detail see the Rules of the Game.

Calculators, Computers and Software
You will need a calculator that has net present value, internal rate of return, yield to maturity, natural logarithm and exponential functions. You will need a computer, or access to one, that is connected to the Internet via Netscape or Internet Explorer, and an email address. AOL is not recommended. This site will be supplemented with links to Web-based software to assist in the valuation of bonds and equities.

The course grade will be determined as follows: Online Problem Sets 10%, Online Quizzes 15%, Portfolio Assignment 10%, Midterm 30%, Final Examination 35%.

These are the suggested grading standards for Stern School of Business Department of Finance Core Type Courses:
A 10%
A- 10-15%
B+ 10%
B, B- 50-60%
C+,C,C-,D,F 10-15%

Limited tutorial assistance will be provided by the teaching assistant, Andre Ramos, email: ar645@stern.nyu.edu.

Additional Resources
The following books may be useful to those wishing to learn more about the fixed-income and equity markets:

Frank J. Fabozzi, Bond Markets, Analysis and Strategies. For short term fixed income securities, get Instruments of the Money Market, published by the Federal Reserve Bank of Richmond; or Dufey and Giddy, The International Money Market (Prentice-Hall). For equity valuation, try Aswath Damodaran, Damodaran on Valuation. See also Bodie, Kane and Marcus, Appendix B.

The Wall Street Journal and the London Financial Times provide the most comprehensive daily coverage of financial and economic news. The most insightful economic commentary may be found in the weekly, The Economist.

Try the following Web sites:


 Course Outline 

Foundations of Finance 

Date Topics Readings
Jan 28,30 The financial markets; interest rates and the economy  BKM Ch 2,3
Feb 4,6 Time value of money; measuring and comparing yields  RWJ Ch 5
Feb 11,13 The money and bond markets  BKM Ch 4,10
Feb 20,25 Risk and return BKM Ch 6
Feb 27,Mar 4 Risk in the context of bond and equity portfolios 
Portfolio report #1 due 
BKM Ch 7,11
Mar 6,18 Valuation and capital asset pricing  BKM Ch 8
Mar 20,25 Equity valuation BKM Ch 13
Mar 27,Apr 1 International financial markets 
Portfolio report #2 due
BKM Ch 20
Apr 8,10 9 Midterm exam
Apr 3,15 10  Cash, futures, FRAs and swaps BKM Ch 18
Apr 17,22 11  Options BKM Ch 16,17
Apr 24,29 12 Options and option applications Convertibles
May 1,6 13  Portfolio strategies, Review
Portfolio report #3 due
BKM Ch 19
May 8,13
Final Exam 

Go to Giddy's Web Portal • Contact Ian Giddy at ian.giddy@nyu.edu