Syllabus

 

ISQS 7342: Advanced Topics in Business Intelligence - Financial Market Analytics

 

Fall 2012

Class Meeting: TR, 2:00-3:20p, BA 271

Instructor: Zhangxi Lin

Office: BA E311, Tel: (806) 834-1926, Email: zhangxi.lin@ttu.edu

-----------------------------------------------------------------

 

 

Financial Market Analytics:

 

Definition: The applications of information technology and statistical methods to covert financial market data into knowledge for decision making, where the financial market is the one for buying and selling of the monetary goods, such as stock, commodities, and their derivatives, or different kinds of financial services, such as credit risk management, loan services, etc.

 

Course Description:

This course is designed for those who intend to further improve their skills in applying analytical methods and techniques in financial market analysis. The course is to address topics in three aspects with the focus on analytical problem solving:

 

1.    Solving financial engineering problems with the Monte Carlo method

2.    Security market analytics

3.    Financial problem solving in the advanced BI approach

Students will master the skills of modeling with SAS Enterprise Guide 4.x, and advanced applications of Excel. Cases in financial market analytics, such as Monte Carlo simulation, financial market forecasting, portfolio optimization, and capital asset pricing modeling will be covered. 

 

Topics:

1.    Monte Carlo simulation for financial engineering

2.    Pairs trading analytics

3.    Financial time series analysis

4.    Analytical results visualization and reporting

 

Software tools:

Base SAS

SAS Enterprise Guide 4.x

Microsoft Excel

 

Prerequisite: A medium-level statistics course, basic skills of analytical tools (e.g. Excel), and basic concepts of financial markets.

 

Learning Outcomes:

A student who successfully completes this course should be able to:

1.    Solve basic financial engineering problems with Monte Carlo simulation methods

2.    Implement statistical arbitrage projects

3.    Financial time series analysis

4.    Visualize and present the analytical results.

 

Assessment of Learning Outcomes:

    

1.    All the relevant theories for financial market analytics will be assessed by exams.

2.    All the skills in financial market analytics will be assessed by in-class exercises, homework, and the term project.

3.    The comprehensive ability to carry out a financial market analytics will be assessed by the term project including both report and presentation.

 

Required textbooks:

·         Financial ModelingUses Excel, by Simon Benninga, Publisher: The MIT Press; third edition (January 8, 2008), ISBN-10: 0262026287, ISBN-13: 978-0262026284

·         SAS Course Notes (e-versions are available to registered students)

o   Querying and Reporting Using SAS® Enterprise Guide®

o   SAS Enterprise Guide: ANOVA, Regression, and Logistic Regression Course Notes, ISBN: 978-1-61290-177-0

 

Optional Textbooks:

·         SAS for Monte Carlo Studies: A Guide for Quantitative Researchers, ISBN: 978-1-59047-141-8, 2002

·         Statistical Arbitrage: Algorithmic Trading Insights and Techniques (Wiley Finance) by Andrew Pole (Hardcover - Oct 5, 2007)

·         Pairs Trading: Quantitative Methods and Analysis (Wiley Finance) by Ganapathy Vidyamurthy, ISBN-10: 0471460672, ISBN-13: 978-0471460671, 2004

 

References:

·         Textbooks

1.    Monte Carlo Methods in Financial Engineering (Stochastic Modelling and Applied Probability) by Paul Glasserman (Paperback - Nov 19, 2010)

2.    Principles of Finance with Excel, Second Edition, Simon Benninga, ISBN13: 9780199755479, ISBN10: 0199755477, Hardback,   816 pages, Sep 2010,  816 pages

3.    Simulation and Monte Carlo: With applications in finance and MCMC, J. S. Dagpunar, ISBN: 978-0-470-85495-2, 348 pages, Wiley, March 2007

 

·         SAS Materials

1.    SAS for Forecasting Time Series, Second Edition, ISBN: 978-1-59047-182-1

2.    Using SAS in Financial Research, Ekkehart Boehmer, John Broussard, and Juha Pekka Kallunki, ISBN: 978-1-59047-039-8, SAS Press, February 2002

3.    Forecasting Examples for Business and Economics Using SAS, ISBN: 978-1-55544-763-2

4.    Stock Market Analysis Using the SAS System: Portfolio Selection and Evaluation, ISBN: 978-1-55544-623-9, 1994

 

Tentative course schedule

 

Week

Lectures

Assignments

Exams

1

Introduction

 

 

2-7

Monte Carlo simulation in finance

1)    Generating Random Numbers and Random variables

2)    Monte Carlo Simulations

3)    Estimating Default Risk and Value-at-Risk

4)    Modeling Time Series Processes

5)    Portfolio optimization

6)    Financial engineering cases

5 exercises

3 quizzes

8-13

Portfolio analytics

1)    CAPM model

2)    Time series

3)    Pairs selection

4)    Risk management

5)    Testing for tradability

6)    Algorithmic trading cases

7)    Advanced topics

5 exercises

3 quizzes

14

Review

Presentations and discussions

1 quiz

15

 

Term project

Final exam

 

Grading Policy:

The total is 320 points.