First cycle
degree courses
Second cycle
degree courses
Single cycle
degree courses
School of Economics and Political Science
Course unit
EPP7078378, A.A. 2018/19

Information concerning the students who enrolled in A.Y. 2017/18

Information on the course unit
Degree course Second cycle degree in
EP2423, Degree course structure A.Y. 2017/18, A.Y. 2018/19
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Degree course track ACCOUNTING AND FINANCE [001PD]
Number of ECTS credits allocated 6.0
Type of assessment Mark
Course unit English denomination FINANCE AND REAL OPTIONS
Website of the academic structure
Department of reference Department of Economics and Management
E-Learning website
Mandatory attendance No
Language of instruction English
Single Course unit The Course unit CANNOT be attended under the option Single Course unit attendance
Optional Course unit The Course unit can be chosen as Optional Course unit

Teacher in charge MARTINO PANIGHEL
Other lecturers MICHELE MORETTO SECS-P/01

ECTS: details
Type Scientific-Disciplinary Sector Credits allocated
Core courses SECS-P/01 Political Economy 6.0

Course unit organization
Period First semester
Year 2nd Year
Teaching method frontal

Type of hours Credits Teaching
Hours of
Individual study
Lecture 6.0 42 108.0 No turn

Start of activities 01/10/2018
End of activities 18/01/2019
Show course schedule 2019/20 Reg.2017 course timetable

Examination board
Board From To Members of the board
2 Commissione AA 2019/20 01/10/2019 30/11/2020 PANIGHEL MARTINO (Presidente)
DI MARIA ELEONORA (Membro Effettivo)
MORETTO MICHELE (Membro Effettivo)
1 Commissione AA 2018/19 01/10/2018 30/09/2019 PANIGHEL MARTINO (Presidente)
DI MARIA ELEONORA (Membro Effettivo)
MORETTO MICHELE (Membro Effettivo)

Target skills and knowledge: Aims

Part A
This class is designed to provide methods of financial risk management using different types of derivative contracts. Risks analyzed are interest rate risk and currency risk. At the end of the course students will approach fixed-income portfolio management issues that are useful to manage cash reserves of non-financial corporations and bond portfolios of financial institutions. Case-studies are mainly related to non-financial firms. Students will be required to prepare group presentations on specific topics.

Part B
This class introduces concepts and methods that overcome limitations inherent in the traditional NPV paradigm. We overcome these limitations by viewing capital investment projects as a collection of options. These “real” options have characteristics similar to exchange-traded financial options. As a result, many of the tools and techniques developed to value financial options may also be used to value real options. The primary purpose of this class is to introduce master’s level students to the application of option valuation techniques to capital investment decisions.
Examination methods: Written exam lasts for two hours
Assessment criteria: Students assessment is based on the final exam and on their cases/projects.
Course unit contents: The course is divided in two parts. Part A (4 CFU) is aimed at providing practical applications of concepts and tools of financial risk analysis and management with respect to corporations and portfolio management using financial derivatives, in particular financial options. Part B (2 CFU) will introduce the valuation method of capital investment projects based on “real” options. Students will get acquainted with the concept of optionality by means of its applications during Part A and will broaden and generalize their perspective on the use of such instruments in Part B.

Part A
Financial risk exposure planning and control in non-financial firms
Financial risk budgeting and measurement
The use of derivatives to hedge interest rate and currency risk
Hedging strategies in non-financial firms
Interest rate risk management of a fixed-income portfolio

Part B
Options Framework for Capital Budgeting
The Contingent Claim Analysis (CCA)
Quantifying Flexibility in Capital Budgeting
Simple Example
- Managerial flexibility
- Forest resources
- Scale production → Call option
- Land use → Put option
Real Options in Practice
American Growth Options
Renewable Options
Switching Options
Abandonment Options
Real Options value for multi-stage projects
Interactions among Multiple Real Options
Planned learning activities and teaching methods: Teaching Method

Part A
After introducing the concept of risk exposure and of the fundamental principles of hedging, lectures will generally involve risk measurement and hedging applications to each specific financial risk and provide examples with respect to different industries.

Part B
After the introduction of the concept of real options and of the fundamental principles of valuation, each lecture will generally involve application to an appropriate industry or enterprise. Students are required to familiar with Excel, and with the basics of options. There will be tutorials in connection with case/report.

Intended learning outcomes

Part A
At the end of this course students will be able to: the appropriate hedging strategies with respect to mandated risk objectives
2.determine the appropriate fixed-income portfolio management technique given objectives and constraints defined in the investment policy statemen of the asset owner.

Part B
Upon completion of the course students will be able to: Find the arbitrage-free price of simple claims in the binomial option pricing model. Determine the real-options value for simple capital investment projects. Determine the real-options value for multi-stage projects. Determine the optimal investment, expansion, and abandonment policies for capital investment projects. Incorporate multiple sources of uncertainty into ROA.
Additional notes about suggested reading: Lecture notes
For theorethical reference and further exercises:
Bodie, Kane, Markus, Investments, McGraw-Hill
Hull, Opzioni, Futures e altri derivati, Pearson
Eiteman, Stonehill, Moffett, Multinational Business Finance, Addison Wesley
Textbooks (and optional supplementary readings)
  • Graeme Guthrie, Real Options in Theory and Practice. Oxford: Oxford University Press, 2009. Cerca nel catalogo
  • Copeland and Antikarov, A Practitioner’s Guide, Revised Edition. New York: Texere, 2003. Cerca nel catalogo