SCHOOL OF BUSINESS AND ECONOMICS

XFI
CENTRE FOR FINANCE AND INVESTMENT

BEFM013: INVESTMENT INSTRUMENTS (15 CREDITS)

FOR
MSC FINANCIAL ANALYSIS AND FUND MANAGEMENT

MODULE INFORMATION HANDBOOK

MODULE CO-ORDINATOR – IAN TONKS

OCTOBER 2006

THE SCHOOL RESERVES THE RIGHT TO REVISE THE PROGRAMME AS NECESSARY

INVESTMENT INSTRUMENTS

1. MODULE AIMS
The general aim of this module is to provide students with a comprehensive overview
of competing models and valuation techniques for equity, bond, derivative, venture
capital and real estate type instruments. The purpose of the module is to equip
students to analyse major issues confronting managers of portfolios of assets and to
use their analysis in making portfolio decisions. The module takes existing
instruments and organised markets as its starting point and aims to develop not only a
scholarly knowledge of contracts but a critical ability able to judge the appropriate use
of each instrument type.

2. INTENDED LEARNING OUTCOMES

After completing the module students will have developed their skills in three
categories:
Subject-Specific Skills
• Have the ability to use critically company and industry analysis for equity
securities
• Be able to use selectively various approaches to the valuation of traded bond
instruments.
• Critically appraise the operation of derivative markets and the specifications of
instruments traded.
• Ability to employ appropriate methods of valuation and forecasting to major asset
classes (equities, bonds, derivatives) and to evaluate the empirical support of each
methodology.
• Have sufficient knowledge of a wide variety of other investment vehicles such as
real estate, venture capital funds and professionally managed funds as to evaluate
critically and comparatively their usefulness to both suppliers and demanders of
financial instruments.
• Ability to develop and apply portfolio formation techniques.

Core Academic Skills

• Ability to apply formal models (eg valuation) to complex phenomena (in this case
financial and investment instruments) to achieve a stated aim and to appraise the
validity of the conclusion in the light of model assumptions and of relevant
empirical evidence.
• Ability to formulate decision problems in a formal, soluble fashion while
preserving key aspects of the ‘real world’ processes generating the data facing the
decision maker.

Personal and Key Skills

• Ability to plan and manage his/her own study both individually and within a
group;
• Ability to make appropriate use of learning resources, including sophisticated
computer datasets;
• Ability to analyse critically problems arising in both academic and practical
contexts;
• Ability to present effectively results and achievements of individual and
collaborative projects as developed through the mode of instruction using both
individual and group assignments

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• Ability to isolate and clarify relevant issues and use resources independently to
achieve a solution to a complex problem.
• Ability to construct work within a group structure to arrive efficiently at a stated
goal.
• Ability to present effectively results and achievements of individual and
collaborative projects as developed through the mode of instruction using both
individual and group assignments.

3. MODULE LECTURER(S)
Ian Tonks is the module co-ordinator. Anthony Broccardo, previously Chief
Investment Officer, Foreign & Colonial Management, Dominic Wallington, Fund
Manager, INVESCO, will present practical sessions and assist in the assessment.
Stephen Zhang Yi (yi1.zhang@ex.ac.uk) will take the classes, and can be contacted
via Ian Tonks or Shirley Learmonth.
Ian Tonks, Room F01, Xfi Building
Contact: tel: (+44) (0)1392 263461
email: I.Tonks@exeter.ac.uk
Office Contact: Fridays 11.00-12.00, or 16.00-17.00 any other time by appointment
with the programme administrator Shirley Learmonth, Room 224, Streatham Court,
Contact: tel: (+44) (0)1392 263320
fax: (+44) (0)1392 264426
email: S.J.Learmonth@exeter.ac.uk

4. MODULE DELIVERY
Lectures: There is a lecture each Friday 9-11am in Xfi Lecture Theatre. At the end of
each lecture, students are assigned exercises to be completed during individual study.
Classes: There is a weekly 1 hour class-tutorial on Friday each week, in which the
exercises assigned from the previous week’s lecture
are covered. There will be no tutorial during the first week of the Semester. In
addition there will be a one-hour class each week specifically aimed at the CFA
syllabus.
CFA Revision Sessions: There will be two weekends of intensive CFA revision
during November taken by Daren Miller

5. MODULE READING
The exam for this module is based on the lecture handouts, and associated exercises.
The reading provides a check and should help ‘deepen’ your knowledge of the
material.

Required Reading
Investment Analysis and Portfolio Management, 7th edition, Frank K. Reilly and
Keith C. Brown (Dryden, 2003)

Additional reading
This will be assigned in the lecture handouts. Some of the lectures include material
from the following textbooks
Solnik, B. and D. McLeavey (2003), International Investments, 5th ed, Addison
Wesley.
Fabozzi, F.J. Fixed Income Analysis for the CFA Program (2nd edn. Fabozzi
Associates, 2004)

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Chamce, D. Analysis of Derivatives for the CFA Program (AIMR, 2003)

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 6. SYLLABUS PLAN AND READING

Week Reading CFA SS CFA Institute

Vol III Vol IV
1 Portfolio Management Overview; The Reilly & SS18 (Part) Reading 76, 77
Investment Management Process; Brown Ch.
Principles of portfolio construction; 1, 2, 17, 25
Review of available instruments: currency,
money markets, equity, bonds, derivatives;
alternative investments
2 Selecting Investments in a Global Reilly & SS12 (Part) Reading 52 &
Market; Organisation and functioning of Brown Ch. 53
securities markets; Security market 3, 4, 5, 12
indicators;
3 Equities: Security valuation; Stock-market Reilly & SS13 Vol II Reading
analysis; Brown Ch. 55 & 56
11, 13
4 Equities: Industry analysis; Company Reilly & SS13 Reading 57, 59,
analysis and stock selection; Technical Brown Ch. 60, 61
analysis, Price Multiples; Discounted cash 14, 15, 16
flow applications;
5 Debt instruments; features of fixed Fabozzi Ch. SS14 Reading 62, 64,
income securities; bond sectors and 1, 2, 3, 4 65, 67
instruments; yield spreads; bond Reilly &
fundamentals Brown Ch.
18
6 Debt Investments: Valuation of Debt Fabozzi SS15 Readings 63,
securities, Risks of bond investments; Ch . 7 68
measurement of interest rate risk; Reilly &
Brown Ch.
19
7 Derivatives: Markets & Instruments; Chance Ch. SS16 Reading 69, 70,
forward and futures markets and contracts, 1, 2,3,4,5,7 71, 72, 73, 74
options; swaps. Reilly &
Brown Ch.
21,22,23,24
8 Alternative Investments; Real estate; Solnik & SS17 Reading 75
hedge funds; venture capital; commodities. McLeavey
Professional Asset Management Ch. 8
Reilly &
Brown Ch.
25
9 Revision for CFA
10 Practice MSc Exams
11 Portfolio Performance Analysis: Risk Reilly &
adjustment, Timing and Attribution Brown Ch.
26
12 Revision for MSc exams
13 Examinations

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7. MODULE ASSESSMENT

The Investment Instruments module is assessed by a mid-term assignment consisting

of a series of multiple choice questions (20%) and a written examination (80%).

The University’s postgraduate marking criteria can be found at the website

http://www.ex.ac.uk/admin/academic/tls/tqa/pgtcrit1.htm, and is also reproduced in
the programme handbook.

8. EXAMINATION

The Investment Instruments module will have a two-hour written examination in

January 2007. The exam has five questions and students must answer three. Only
silent non-programmable calculators are permitted

9. REFERRED EXAMINATION

If you fail the examination, you will be advised of this and will be allowed to resit the
examination once. The resit examination is in early September 2007.