17–27 August 2026
Course syllabus
The course begins with the valuation principles shared across finance and ends with the institutional questions raised by digital money. This page states the scope of each day, the calculation you carry into the practical work, and the readings that support the sequence.
Course description
Finance is built from promises dated in time and exposed to uncertainty. The course first develops a disciplined way to value those promises: cash-flow timelines, discount factors, interest-rate conventions, bond prices, stock values, diversification and the market price of risk. These ideas provide the analytical base for the rest of the course.
The second half studies contracts and institutions that transform or transmit financial risk. Students examine forwards, futures and options; use high-frequency market prices to separate central-bank decisions from surprises; and compare Bitcoin, stablecoins, central-bank digital currency and bank deposits as different claims moving across different settlement systems. Computation is used where it clarifies the economics: to reproduce a price, expose sensitivity, or make an empirical claim auditable.
Course aims
The central aim is to connect financial intuition, analytical reasoning and reproducible calculation. Students should leave able to translate a financial question into cash flows, states or market observations; choose an appropriate model; carry out the calculation; and explain both the result and its limitations.
Learning outcomes
On successful completion, you will be able to:
- construct cash-flow timelines and discount values consistently under simple, periodic and continuous compounding;
- interpret APR, effective annual rates, discount factors, spot rates and forward rates without mixing quotation conventions;
- value bonds and equities, identify the assumptions doing most of the work, and measure sensitivity to rates, growth and terminal value;
- calculate portfolio return and risk, estimate beta, apply the CAPM, and distinguish diversifiable from systematic risk;
- derive and interpret basic no-arbitrage relations for forwards, futures and options, and compare hedged with unhedged outcomes;
- construct and critique a high-frequency monetary-policy event study using market expectations, event windows and central-bank communication;
- evaluate digital monetary arrangements by economic function, balance-sheet claim, redemption, governance and final settlement;
- use a transparent Python notebook to reproduce a financial calculation and communicate the economic conclusion rather than merely report code output.
Teaching and assessment
Teaching method. Each day is organised as one connected argument rather than a catalogue of techniques. A financial problem motivates the model; the model is built analytically; evidence or a case tests the result; and computation extends the calculation where it adds value. Questions and short exercises are used throughout.
Quiz and practical work. A short daily quiz checks concepts, calculations and interpretation, followed by a guided solution. Python practicals and homework reproduce or extend the standard calculations. Python is therefore present across the course, but it is not required in every lecture segment.
Course schedule
| Day | Topic | |
|---|---|---|
| Week One · Valuation and capital markets | ||
| Day 1Mon 17 Aug | The time value of money | |
| Day 2Tue 18 Aug | Interest rates | |
| Day 3Wed 19 Aug | Valuing bonds | |
| Day 4Thu 20 Aug | Risk, return and uncertainty | |
| Week Two · Risk transfer, information and digital finance | ||
| Day 5Mon 24 Aug | Managing risk with derivatives | |
| Day 6Tue 25 Aug | Central-bank communication and expectations I | |
| Day 7Wed 26 Aug | Market expectations and climate communication | |
| Day 8Thu 27 Aug | Bitcoin, digital money and payments | |
Session map
Week One · Valuation and capital markets
The Time Value of Money
A dated cash flow is the basic object of financial valuation. The session begins with timelines and the law of one price, then develops future value, present value and NPV. Annuities, perpetuities and equal-payment loans are treated as recognisable cash-flow patterns rather than disconnected formulas.
Financial question What common valuation date allows cash flows at different dates to be compared without mixing units?
Computation Represent irregular cash flows, calculate PV, FV and NPV, value repeated cash flows and verify an amortisation schedule.
Interest Rates
An interest rate is incomplete without its maturity, compounding convention, currency and economic context. The session translates periodic rates, APR and EAR; separates nominal from real returns; and builds discount factors, spot rates and forward rates into a term structure. The closing decision asks which curve and adjustment match a promised cash flow.
Financial question Which interest rate belongs to this cash flow, and what does today's curve imply without guaranteeing a future rate?
Computation Translate quotations, calculate real returns, construct discount factors and recover forward rates from a frozen teaching OIS curve.
Valuing Bonds
A bond is a schedule of promised coupons and principal. You price that schedule with discount factors, distinguish clean from dirty price, and solve yield to maturity as the single rate that reproduces a market price. Duration and DV01 give a local measure of rate exposure; convexity explains why the price–yield relation bends. Credit risk separates promised yield from expected return.
Financial question What does the bond promise, which curve prices those promises, and how will its value respond when rates move?
Computation Price coupon bonds from a spot curve, solve and verify YTM, calculate accrued interest, duration, convexity and DV01, and compare approximate with exact repricing.
Risk, Return and Uncertainty
Equity is a residual claim, so its cash flows are uncertain and potentially long-lived. The session starts with dividends and total payout, then distinguishes enterprise value from equity value through free cash flow. Constant-growth valuation makes the interaction between the discount rate and growth explicit; terminal value and multiples reveal where apparently precise valuations become assumption-sensitive.
Financial question Which future cash flows belong to shareholders, and how much of today's value rests on growth that has not yet occurred?
Computation Build base, upside and downside valuations, trace a discount-rate/growth sensitivity surface, compare payout measures and interpret peer multiples.
Week Two · Risk transfer, information and digital finance
Managing Risk with Derivatives
An operating decision creates an exposure before a derivative is chosen. The session maps the adverse state and desired cash-flow shape, then compares a customised forward, a standardised futures hedge and one-sided option protection. Daily margin, basis mismatch, premium and the Tsingshan and China Aviation Oil cases show why a payoff that looks correct can still fail through scale, liquidity or governance.
Financial question Which exposure should the firm retain, fix or bound, and can it fund the obligation created by the hedge?
Computation Combine physical and derivative cash flows, size forward and futures positions, follow a margin ledger, estimate a minimum-variance hedge ratio and compare option payoff with profit.
Central-Bank Communication and Expectations I
Policy works partly through beliefs about the future. The session connects central-bank communication to expectations, distinguishes an announcement from its unexpected component, and treats financial prices as noisy but timely measurements of those beliefs. Event windows and movements across maturities separate current-policy news from changes in the expected path.
Financial question What did markets expect before the announcement, and what changed relative to that expectation?
Computation Recover implied rates, construct policy surprises and compare market responses across short event windows and maturities.
Market Expectations and Climate Communication
The first part reads expected policy from surveys, Federal Funds futures and FedWatch-style meeting probabilities, then uses narrow announcement windows to separate prior expectation from policy news. The second part asks when climate discussion becomes central-bank evidence: a keyword finds a candidate, but context and mandate linkage decide whether the passage concerns inflation, financial stability, supervision or operations.
Financial question What was priced before the decision, what changed at the announcement, and when does climate language become policy-relevant evidence?
Computation Decode a futures quote, calculate a meeting probability, inspect high-frequency rate changes and audit climate-keyword false positives.
Bitcoin, Digital Money and Payments
The session begins with monetary function and balance-sheet claims. Bitcoin is studied as a protocol, scarce native asset and volatile market, including mining, custody, keys and exchange-traded access. Stablecoins add an issuer, reserves and a promise of redemption; CBDC changes the public's access to central-bank liabilities. The payment-system sequence then distinguishes initiation, clearing, settlement and finality, using UK retail systems and CHAPS to show why high value and high volume are not the same problem.
Financial question What claim is transferred, who stands behind it, and where does settlement become final?
Computation Measure Bitcoin drawdowns, analyse a stablecoin de-peg and compare the scale and settlement design of UK payment systems.
Scope and depth
The course is analytically serious but deliberately selective. Students calculate present values, bond risk, equity sensitivities, portfolio risk, beta, derivative payoffs and event-study measures. They interpret the assumptions behind those calculations. Topics that require a separate advanced course are identified but not compressed into a few slides.
| Covered and applied | Introduced for context | Outside the core course |
|---|---|---|
| Discounting, spot and forward rates; bond and stock valuation; duration and convexity; portfolio risk, beta and CAPM | Yield-curve construction, factor models, credit and liquidity premia | Advanced fixed-income models, stochastic interest rates and credit derivatives |
| Forward and futures pricing; margin; basis risk; option payoffs, bounds, parity and simple strategies | Why volatility and dynamic hedging matter for option value | Binomial valuation, Black–Scholes derivation, Greeks, implied volatility surfaces and exotic options |
| Policy surprises, narrow event windows, yield-curve responses and transparent text scores | Target/path decompositions and identification assumptions | Full structural monetary-policy models and production natural-language processing systems |
| Bitcoin, stablecoins, CBDC, commercial-bank money, clearing, settlement and finality | Tokenisation, custody architecture and regulatory design | Protocol engineering, smart-contract programming and jurisdiction-by-jurisdiction legal advice |
Core bibliography and reading list
Chapter numbers below follow the editions used for the course. Where editions differ, the topic title is the reliable guide.
Core textbooks Days 1–6
- Berk, Jonathan, and Peter DeMarzo. Corporate Finance. Chapters 4–6 on the time value of money, interest rates and bonds; Chapter 10 on capital markets and the pricing of risk; Chapter 20 on financial options.
- Brealey, Richard A., Stewart C. Myers, Franklin Allen, and Alex Edmans. Principles of Corporate Finance. Chapters 2–4 on present value, bonds and stocks; Chapter 8 on the CAPM; Chapter 21 on understanding options.
- Hull, John C. Options, Futures, and Other Derivatives. Selected introductory chapters on forward and futures markets, hedging strategies, option-market mechanics and option payoffs. Chapter numbering varies by edition.
- Mishkin, Frederic S. The Economics of Money, Banking, and Financial Markets. Chapters 3–5 on money, the meaning of interest rates and the behaviour of interest rates.
Market data, monetary-policy news and communication Days 1, 2, 4, 7 and 8
- Bank of England. Yield Curve Terminology and Concepts. Official guide to UK spot and forward curves.
- Kuttner, Kenneth N. “Monetary Policy Surprises and Interest Rates: Evidence from the Fed Funds Futures Market.” Journal of Monetary Economics 47, no. 3 (2001): 523–544.
- Gürkaynak, Refet S., Brian Sack, and Eric Swanson. “Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements.” International Journal of Central Banking 1, no. 1 (2005): 55–93.
- Kansoy, Fatih. “The Immediate Global Impact of US Monetary Policy.” University of Oxford Department of Economics Discussion Paper No. 1095, 2025. Oxford ORA record and paper.
- Kansoy, Fatih, and Dominykas Stasiulaitis. “Monetary Policy Transmission and Environmental Performance: Firm-level Evidence from High-Frequency Identification.” University of Oxford Department of Economics Discussion Paper Series, 2025. Oxford ORA record and paper.
- Kansoy, Fatih. “Central Bank Communication and CBDC Implementation.” University of Oxford Department of Economics Discussion Paper No. 1110, 2026. Oxford ORA record and paper.
- Federal Reserve Bank of San Francisco. U.S. Monetary Policy Event-Study Database. Data and documentation.
- Kenneth R. French. Data Library. Market, factor and industry portfolio returns.
Digital money and payments Day 8
- Prasad, Eswar S. The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance. Harvard University Press, 2021. Selected chapters on Bitcoin, cryptocurrencies, stablecoins, central-bank digital currencies and payments.
- Nakamoto, Satoshi. Bitcoin: A Peer-to-Peer Electronic Cash System. 2008. Original paper.
- Bank for International Settlements. “Anchoring Trust in Money: Innovation beyond Stablecoins.” Annual Economic Report 2026, Chapter III. BIS chapter.
- Bank of England. Payment and Settlement Statistics. CHAPS, RTGS and UK payment-system data.
- Coin Metrics. Community API. Documentation for reproducible digital-asset data.
Acknowledgements and sources
The day quizzes and the two weekly examinations are written for this course. Their coverage, difficulty and the common misconceptions they test draw on the instructor materials accompanying Berk and DeMarzo, Corporate Finance (Pearson Education), used under the instructor licence held for this course: the test bank, the instructor's solutions manual and the instructor manual. Copyright in those materials remains with Pearson Education.
Worked examples, figures and numerical illustrations in the lecture slides are the instructor's own unless a slide states otherwise.
