UCLA MFE curriculum

Total Program Curriculum: 52 units


Course Descriptions:


Fundamentals of Corporate Finance and Accounting (4 units)This course provides students an understanding of the financial statements and tax liabilities of firms. The course also provides an introduction to the key issues facing corporate financial decision makers such as making capital budgeting and investment decisions, designing the capital structure of the firm, minimizing agency costs and the costs of financial distress, the role of financial innovation, capital markets, and the valuation of real options embedded in investment projects, e.g. the option to expand, contract, and shut down operations temporarily.


Fundamentals of Investments (4 units)

This course covers the essentials of asset pricing and portfolio choice. The course begins with standard discounted cash flow approaches and the no-arbitrage framework for valuing financial securities. The basic paradigms of asset pricing such as the CAPM, the APT, and the Fama-French Three-Factor model are also discussed. Dynamic portfolio selection and optimization approaches are developed and illustrated. The course also provides a brief introduction to a number of important asset classes such as equities, corporate bonds, real estate, and venture capital.


Introduction to Stochastic Calculus and Derivatives (4 units)This course covers the economic, statistical, and mathematical foundations of derivatives markets. The course presents the basic discrete-time and continuous-time paradigms used in derivatives finance including an introduction to stochastic processes, stochastic differential equations, Ito's Lemma, and key elements of stochastic calculus. The economic foundations of the Black-Scholes no-arbitrage paradigm are covered including an introduction to Girsanov's theorem and changes of measure, the representation of linear functionals, equivalent martingale measures, risk-neutral valuation, fundamental partial differential equation representations of derivatives prices, market prices of risk, and Feynman-Kac representations of solutions to derivatives prices. The role of market completeness and its implications for the hedging and replication of derivatives will be covered in depth.


Derivatives Markets (4 units)

This course offers an introduction to derivatives markets. Derivatives are both exchange traded and over-the-counter securities. The derivatives markets are the world's largest and most liquid. This course will focus on the organization and role of put and call option markets, futures and forward markets, and their interrelations. The emphasis will be on arbitrage relations, valuation, and hedging with derivatives. The course will also cover the implementation of derivatives trading strategies, the perspective of corporate securities as derivatives, the functions of derivatives in securities markets, and recent innovations in derivatives markets.


Empirical Methods in Finance (4 units)

This course covers the probability and statistical techniques commonly used in quantitative finance. Students use estimation application software in exercises to estimate volatility, correlations, and stability.


Fixed Income Markets (4 units)

This course provides a quantitative approach to fixed-income securities and bond portfolio management with a focus on fixed-income security markets. The course covers the pricing of bonds and fixed-income derivatives, the measurement and hedging of interest rate risk, dynamic models of interest rates, and the management of fixed income portfolio risk.


Computational Methods in Finance (4 units)

This course covers the quantitative and computational tools used in finance. This includes introducing numerical techniques such the implementation of binomial and trinomial option pricing, lattice algorithms for computing derivative prices and hedge ratios, simulation based algorithms for pricing American options, and the numerical solution of the partial differential equations that appear in financial engineering.


Quantitative Asset Management (4 units)This course emphasizes the application of state-of-the-art quantitative techniques to asset management problems. The course covers asset pricing models in depth, portfolio optimization and construction, and dynamic strategies such as pairs trading, long-term and short-term momentum trades, and strategies that address behavioral finance anomalies. The course also discusses major forms of asset management structures such as mutual funds, hedge funds, ETFs, and special investment vehicles, and examines some of the primary types of trading strategies used by these organizations.


Financial Risk Measurement and Management (4 units)

This course examines financial risk measurement and management, including market risk, credit risk, liquidity risk, settlement risk, model risk, volatility risk, and kurtosis risk.


Credit Markets (4 units)

This course provides an introduction to the building and implementation of credit models for use by financial institutions and quantitative investors. The course covers the basics of corporate debt securities and provides an in-depth introduction to the credit derivatives markets. Structured credit products such as both cash and synthetic collateralized debt obligations (CDOs) are discussed.


Financial Institutions Seminar

These noncredit seminars on financial institutions consist of a series of presentations by various practitioners on topics relate to the practice of financial engineering. Examples of topics covered include discussions on how risk management is implemented at various investment banks, on how quantitative asset management is performed at equity and fixed income investment firms, and on current trends in the use of quantitative analysis and techniques among hedge funds and other institutional investors.


Applied Finance Project (8 units total)

Every MFE students is required to complete an applied quantitative finance project that explores a quantitative finance problem that might be met in practice and involves the development or use of some of the tools developed in the MFE program. Participation requires prior approval of the project by the supervising faculty member.


Special Topics in Financial Engineering (4 units)A Special Topics in Financial Engineering course may replace a specific markets class in any given year. Special Topics can change from year to year. This course consists of an in-depth examination of problems or issues in an area of current concern in financial engineering. Past topics have included Asset Backed Securities Markets and Behavioral Finance.