Module Code: H9ASA
Long Title Applied Security Analysis
Title Applied Security Analysis
Module Level: LEVEL 9
EQF Level: 7
EHEA Level: Second Cycle
Credits: 5
Module Coordinator: CORINA SHEERIN
Module Author: JOE NAUGHTON
Departments: School of Business
Specifications of the qualifications and experience required of staff  
Learning Outcomes
On successful completion of this module the learner will be able to:
# Learning Outcome Description
LO1 Evaluate and appraise the principles of asset valuation, and apply these principles in a variety of situations.
LO2 Critically evaluate equity valuation techniques and understand in what circumstances it is appropriate to apply each model and understand the assumptions and limitations inherent in each model.
LO3 Select, categorise and appraise a variety of fixed income security valuation and relative value techniques and understand how these may be applied to a variety of bonds including bonds with embedded options.
LO4 Demonstrate an advanced knowledge of the Mortgage and Asset Backed sector of the bond market with a comprehensive knowledge of the risk characteristics and pricing techniques for various types of Mortgage and Asset Backed Securities.
LO5 Apply credit risk principles to the valuation of derivative securities
Dependencies
Module Recommendations

This is prior learning (or a practical skill) that is required before enrolment on this module. While the prior learning is expressed as named NCI module(s) it also allows for learning (in another module or modules) which is equivalent to the learning specified in the named module(s).

No recommendations listed
Co-requisite Modules
No Co-requisite modules listed
Entry requirements

There are no additional entry requirements for this module.  The programme entry requirements apply. 

 

Module Content & Assessment

Indicative Content
Dividend Discount Models
Use CAPM and APT to select an appropriate discount rate Review of the derivation of the Gordon Growth Model Present Value of Growth Opportunities (PVGO) Calculate the value of common stock using the dividend discount model, one stage, two stage, H-model, constant growth model Determination of terminal value
Free Cash Flow Models
Analysis of financial statements to infer FCFE and FCFF Weighted Average Cost of Capital Approaches for forecasting FCFE and FCFF Use of constant growth, multistage and spreadsheet based free cash flow valuation models Sensitivity of models to dividends, share repurchases, changes in leverage
Market Multiples
Method of comparables vs. method of forecasted fundamentals Definition and justification of marker multiples: P/E, P/B, P/S, earnings yield, and dividend yield Use of the P/E-to-growth ratio (PEG) Use of maker multiples in the terminal value of discounted cash-flow valuation
Residual Income Models
Definition and interpretation of the terms residual income, economic value added, and market value added Discussion of the nature of residual income valuation models and the circumstances in which they should be used Accounting issues: violations of the clean surplus relationship Single and multi-stage residual income models.
Credit and Interest Rate Risk in Fixed Income Securities
Analysis of default, downgrade and credit spread risks Credit analysis of corporate, sovereign, municipal and asset backed securities Term Structure of Interest Rates Yield curve dynamics Theories of the shape of the yield curve Interest rate risk: duration and convexity Derivation of Macaulay Duration expression using calculus Quantification of Convexity adjustment Interest rate risk: key rate duration and present value of a basis point Analysis of interest rate volatility.
Bonds with Embedded Options
Overview of short rate interest rate models Use of binomial trees to value bonds Extension of the model to price callable and puttable bonds Spreads: nominal spread, z-spread, and Option Adjusted Spread Characteristics and risk analysis of convertible bonds
Mortgage-Backed Securities
Analysis of the characteristics of amortising loans Mortgage pass-through securities Prepayment characteristics – PSA benchmark Collateralised mortgage obligations and structures –Sequential Pay Tranches, Planned Amortisation Class CMOs, IO and PO strips Commercial Mortgage-Backed Securities
Asset Backed Securities
Analysis of the basic structural features of different types of asset backed securities: auto-loans, credit card receivables, home equity loans, student loans, and manufactured housing loans Analysis of the credit enhancements on various asset backed securities Analysis of the structure and characteristics of cash and synthetic Collateralised Debt Obligations
Valuation of Mortgage Backed and Asset Backed Securities
Overview of Monte Carlo simulation for MBS valuation Computation of spreads and effective duration Analysis of convexity for mortgage-backed securities
Modelling of Credit Risk and Valuation of Credit Derivatives
Constant hazard rate for default modelling Credit Default Swap Valuation Valuation of Basket CDS and CDO Use and limitations of Gaussian Copula models Overview of Credit Value Adjustment (CVA) for Derivatives Methods of computing CVA Risk dynamics of CVA
Assessment Breakdown%
Coursework40.00%
End of Module Assessment60.00%

Assessments

Full Time

Coursework
Assessment Type: Continuous Assessment % of total: 40
Assessment Date: n/a Outcome addressed: 1,2,3,4
Non-Marked: No
Assessment Description:
Candidates are required to complete an equity valuation assignment.
End of Module Assessment
Assessment Type: Terminal Exam % of total: 60
Assessment Date: End-of-Semester Outcome addressed: 1,5
Non-Marked: No
Assessment Description:
Final Examination, which will cover the entire course and will be a mix of theory and computational questions
No Workplace Assessment
Reassessment Requirement
Repeat examination
Reassessment of this module will consist of a repeat examination. It is possible that there will also be a requirement to be reassessed in a coursework element.

NCIRL reserves the right to alter the nature and timings of assessment

 

Module Workload

Module Target Workload Hours 0 Hours
Workload: Full Time
Workload Type Workload Description Hours Frequency Average Weekly Learner Workload
Lecture Classroom and demonstrations 24 Per Semester 2.00
Directed Learning Directed e-learning 24 Per Semester 2.00
Independent Learning Independent learning 77 Per Semester 6.42
Total Weekly Contact Hours 4.00
Workload: Part Time
Workload Type Workload Description Hours Frequency Average Weekly Learner Workload
Practical No Description 2 Every Week 2.00
Assignment No Description 4 Every Week 4.00
Independent Learning No Description 4.5 Every Week 4.50
Total Weekly Contact Hours 2.00
 

Module Resources

Recommended Book Resources
  • CFA Level 2 Kaplan Schweser notes, books 3 and 5, Equity Investments and Fixed Income.
  • Petitt, B, (2019), Fixed Income Analysis Workbook, CFA Institute Investment Series.
  • Cuthbertson, K, (2009) ,Investments ,2nd Edition, Wiley.
  • Pinto, J, (2015), Equity Asset Valuation, CFA Institute Investment Series.
  • Hull, J, (2021) Options, Futures, and Other Derivatives, Global Edition Pearson.
This module does not have any article/paper resources
Other Resources
  • [Website], http://www.wilmott.com.
  • [Website], http://www.mathfinance.de.
  • [Website], www.garp.com.
  • [Website], www.bloomberg.com.
  • [Website], www.reuters.com.
Discussion Note: