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New course aims to educate graduates in more sophisticated financial products Back  
Responding to the Government’s desire to create a more front-office oriented international financial services sector, the University of Limerick has created a masters programme aimed at equipping graduates with the necessary technical skills for specialised fund-management, hedge-fund and proprietary trading / capital markets operations, Bernard Murphy writes.
The IFSC Asset & Investment Management Task Force (set up under the aegis of the Department of the Taoiseach) and the IDA have recently highlighted the importance of encouraging more ‘front-office’ oriented financial services institutions to locate in the IFSC. The clear objective is to generate more of what might be described as ‘value-added’ employment opportunities in the Irish financial services industry. The recent arrival in the IFSC of three international hedge fund managers (Burdon Capital, Vega Asset Management and Broadstone Fund Management Finance Magazine March 2004) is evidence of a general trend in this direction. More specifically, the strategy is reflective of the growing importance of alternative investment strategies and proprietary trading activities in the financial services industry worldwide.

In responding therefore to the educational needs of an increasingly technical and sophisticated sector of the national economy, the University of Limerick has recentlyy launched a 1-year full-time Masters programme in Finance. Delivered primarily by faculty of the Department of Accounting & Finance in the Kemmy Business School, the MSc in Financial Services programme is designed to underpin the strategic development of the financial services industry by ensuring a supply of highly-educated graduates to the sector. A key educational objective is that graduates of the programme will be equipped with the requisite balance of technical skills and academic knowledge desired by indigenous and overseas financial institutions involved in retail financial services and in the more specialized fund-management, hedge-fund and proprietary trading / capital markets operations which are now well established in the IFSC.

A unique combination of subjects ranging from relatively mainstream modules in banking & portfolio management, international finance and financial information analysis to more specialised courses in taxation of financial services, integrated risk-management and financial engineering - is offered in order to respond to both the diverse educational needs of the marketplace and to facilitate subsequent professional accreditation within the international financial services industry. A major research dissertation accounts for approximately one-third of the overall course grade and affords candidates the opportunity to develop an advanced competency in an area of the financial services industry, which has been agreed with their academic supervisors.

In designing the MSc curriculum, the professional focus and orientation of the programme has also been assured by benchmarking course content against the examination curriculum of the Chartered Financial Analyst (CFA) professional accreditation programme administered in Ireland by the Irish Association of Investment Analysts (IAIA) on behalf of the US-based American Association for Investment Management & research (AIMR). Consequently, graduates of the MSc programme should be well equipped to subsequently undertake an independent programme of study leading ultimately to CFA professional accreditation.

In many modules a special emphasis has been placed on ‘learning-by-doing’ and therefore on IT-based delivery mechanisms. These range from workshop-style lab-based tutorials to the use of online e-learning aids developed by faculty and / or external programme contributors. For example, in the financial engineering module students are exposed to a ‘virtual’ trading floor environment through an interactive trading desk simulator. The latter is a key component of an online e-learning tutorial, which has been specifically developed for the MSc programme by UL MA in E-Learning candidate Barry Murphy (a former convertible bond senior trader at Merrill Lynch and UBS investment banks). MSc candidates can access the online tutorial independently and learn about the Black-Scholes option pricing formula, risk-management and the Greeks and learn first-hand how proprietary trading activities are carried out in the ‘real world’. In the trading desk simulator, for example, students are faced with the real-time challenge of trading and risk-managing a portfolio of options and underlying stock in the face of randomly changing price and volatility.

In conjunction with a formal seminar series in financial econometrics, students learn about the dynamics of time-varying volatility models (both stochastic and deterministic) and consequently acquire quite a technical insight into how, for example, a sophisticated ‘volatility trading’ strategy might be implemented as an ‘alternative investment strategy’ in the long-dated equity index options market.

Besides emphasising the obvious derivatives trading and alternative investment applications, the financial engineering module also looks at how insights from the financial derivatives industry have been applied in other markets. For example, students learn how ‘virtual power station’ deals or cross-commodity structured derivative products can be valued, traded and risk-managed. Using replication-based financial engineering arguments, students learn how the payoff profile from a physical asset such as a flexibly-engineered gas-fired power station can be mimicked or replicated by a portfolio of daily-exercise financial call options on an underlying ‘spark-spread’.

Given the liberalisation of the Irish and UK gas and power markets, and the linking of the respective markets by inter-connectors, the insights acquired by students are therefore both contemporary and state-of-the-art. As with other modules in the programme, the financial engineering module is an example of how students benefit from the research interests of accounting and finance faculty who have internationally-recognised academic qualifications in their respective fields as well as senior-level professional experience in both industry and in the financial markets.

Demand for places on the programme in its first year has been strong, with an initial cohort of 31 students expected to complete their studies in late September 2004. The course director, Fergal O’Brien, anticipates that demand for places will now intensify as the programme establishes itself and an awareness of the MSc in Financial Services spreads amongst final-year undergraduate students, amongst financial services professionals looking to further develop their skills base and, not least, amongst prospective employers.

Further information on the UL Masters in Financial Services programme may be obtained from the UL website www.ul.ie/business/courses/postgrad.shtml or from the course director, Fergal O’Brien at fergal.g.obrien@ul.ie

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