Full-Time MBA

Analytic Finance

The Analytic Finance concentration allows you to gain a deeper and more precise knowledge of financial theories, their application to a variety of business problems, and the empirical work by which we learn how the financial world works. Chicago Booth offers the largest number of advanced finance classes of any business school, and the analytic finance concentration gives recognition to students who pursue this specialization.

At Chicago Booth, you'll learn to do cutting-edge analysis as practiced in hedge funds, investment banks, risk management, and more. How do you evaluate a hedge-fund manager? How should an airline hedge its exposure to jet fuel costs? How is the value of a structured mortgage product affected if interest rates rise 1%? What is the evidence that the "carry trade" in international markets works? You will learn the quantitative tools needed to sift through complex financial data and analysis to create innovative solutions to real financial issues.

ANALYTIC FINANCEYou'll have the chance to explore activities outside the classroom in numerous ways that will also allow you to build new skills, relationships, and networks. These include:

  • Bank Week - Bank Week provides students with an opportunity to visit banks in New York City during the week after the fall quarter ends. The Investment Banking Group (IBG) arranges for banks to host students for lunches, presentations, cocktails, and other networking events. Students participate in informational interviews and those interested in sales & trading often arrange to sit on trading desks while in New York for Bank Week.
  • Hedge Fund Group - This group hosts guest speakers from the industry and seminars by Chicago Booth professors. The club also supports students in their recruiting efforts by cultivating industry contracts and assisting with resume preparation.
  • Investment Banking Group - The largest student group on campus, the Investment Banking Group serves as a link between investment banks, Chicago Booth students, and Career Services. Their goal is to equip members with knowledge of the investment banking industry and aid in guiding them toward a career in their area of interest. It is our mission to educate the industry about the specific strengths of Chicago Booth students and the Chicago Booth curriculum. Throughout the year, we hold various events to help educate students about investment banking and aid them in navigating the recruiting process.
  • Investment Management Group - This group provides information on careers in the investment management field and the practical workings of capital markets. It sponsors guest speakers and the Investment Management Conference. The Investment Management Group helps prepare students for interviews as well as provides students with an opportunity to learn how to present an investment thesis through pitches and writing an investment newsletter.
  • Training the Street LBO Modeling Seminar - This intensive, one-day workshop is designed to develop an understanding of leveraged buyout analysis through actual hands-on construction of an LBO model. Each participant will build their own interactive LBO model from scratch to gain a detailed understanding of LBO analysis. The focus of the model is to effectively represent the interests of the three main constituents of the deal – the selling shareholders, the lenders, and the financial sponsor.

You’ll have the option of taking courses that address your individual career choices. Samples include:

  • Empirical Asset Pricing - This course provides the basis for testing asset pricing theory. Topics covered include 1) basic statistical tests of asset prices, 2) portfolio theory, 3) single and multi-factor pricing models, 4) market efficiency and anomalies, including value-growth and momentum, 5) behavioral finance, 6) market frictions, 7) trading costs, liquidity, and liquidity risk, 8) financial crises and opportunities for quantitative investing, and 9) empirical evidence on portfolio choice (home and local bias, private equity holdings). These topics and techniques will change depending on the current "state-of-the art" in asset pricing.
  • Financial Engineering: Mathematical Models of Option Pricing and their Estimation - This course covers the analytical and numerical methodologies applied by hedge funds and derivatives trading desks to price complex derivative securities and devise arbitrage strategies. In a world of increasingly higher sophistication, the valuation of complex derivative securities and the design of arbitrage strategies require the understanding and application of advanced models of option pricing, and their application to real data. This course emphasizes both, and provides students with real-world problems to solve.
  • Theory of Financial Decisions 1 - This PhD-level course is concerned with models for portfolio decisions by investors and the pricing of securities in capital markets. It is meant to be difficult, but accessible to the motivated MBA student.
  • Portfolio Management - This quantitative course presents advanced material relevant for portfolio managers, extending the material covered in Investments. Topics include the money management industry (mutual funds, pension funds, hedge funds), modern techniques for optimal portfolio selection, liquidity and transaction costs, properties of asset returns, and investment strategies designed to exploit apparent violations of market efficiency.
  • Advanced Investments - This course has one central theme. Asset pricing has undergone a sea change in the last 20 years or so, with the realization that expected returns do vary across time, and across assets, in ways that the static CAPM and random-walk view does not recognize. We will cover a range of topics, including 1) how stock and bond returns can be predicted over time; 2) understanding the volatility of stock and bond returns; 3) multi-factor models for understanding the cross-sectional pattern of average returns, such as value, growth and momentum effects; 4) the size of the average market return and its relation to fundamental risks; 5) optimal portfolios that reflect multifactor models, return predictability, and hedging motives; 6) advanced trading strategies used by trading desks and hedge funds; 7) performance evaluation and benchmarks for funds; 8) liquidity effects and "bubbles" in stocks and bonds.
  • Fixed-Income Asset Pricing - This course covers state-of-the art models and techniques required to analyze fixed-income instruments, and their derivatives, in modern financial markets. By the end of the course, students will learn 1) the basic concepts of fixed-income instruments, such as yield, duration, and convexity; 2) the modern empirical methodologies to describe Treasury and corporate bond data, such as "curve fitting," factor analysis, and default probabilities; 3) the most recent modeling techniques for fixed-income derivative products used in the street, such as the models of Vasicek, Cox Ingersoll, and Ross, Ho and Lee, Hull and White, Black-Derman-Toy, and Heath-Jarrow-Morton; and, importantly, 4) how to use these models in practice to value both traditional derivative instruments, such as swaps, bond options, caps and floors, as well as the more recent products, such as inverse floaters, range notes, mortgage backed securities, and credit derivatives. The key feature of Fixed-Income Asset Pricing is that it strongly emphasizes the applications of these models to value real-world fixed-income products, and their derivatives, by focusing both on the practical difficulties of applying models to the data, as well as on the necessity to use computers to compute prices.
  • Financial Engineering - Cases in Financial Risk Management - Financial risk management is reported to be the main reason for the use of financial derivatives by non-financial institutions. This course has two main objectives. The first is to cover techniques to identify, measure, and manage corporate financial risk, as modern financial markets and regulation require. Specifically, topics of discussion will include dynamic hedging and portfolio replication, the development of value-at-risk, the management of exchange-rate risk, interest-rate risk, credit risk, and operation risk. The second main objective is to build a framework to integrate financial risk-management solutions with long-term corporate strategy. We will discuss cases where the use of financial engineering was vital for the success of a business strategy. Typical applications in this case include privatizations, mergers and acquisitions, and financing strategies, among others. However, the course will focus more on the uses of derivative securities rather than their technical aspects.

You’ll study with professors who conduct groundbreaking research and are recognized for their impact on the theories and models associated with investments and financial markets.

John H. Cochrane

John H. Cochrane, AQR Capital Management Distinguished Service Professor of Finance, is a research associate and past director of the asset pricing program of the National Bureau of Economic Research and a Fellow of the Econometric Society. His recent publications include the book Asset Pricing and numerous articles on his research topics.

George M. Constantinides

George M. Constantinides, Leo Melamed Professor of Finance, studies the causes of the historically observed premium of equity returns over bond returns, the value premium, and the size premium; the pricing and hedging of fixed-income securities, options, futures, and other derivatives; the effects of transaction costs and taxes on the pricing of derivatives; and portfolio management. 

Douglas W. Diamond

Douglas W. Diamond, Merton H. Miller Distinguished Service Professor of Finance, specializes in the study of financial intermediaries, financial crises, and liquidity. His work has appeared in such notable journals as the Journal of Financial Economics, the Journal of Finance, the Review of Economic Studies, the American Economic Review, and the Journal of Political Economy.

Eugene F. Fama

Eugene F. Fama, Robert R. McCormick Distinguished Service Professor of Finance, is widely recognized as the "father of modern finance." Fama is among the most cited of America's researchers. He focuses much of his study on the relation between risk and return and implications for portfolio management.

John C. Heaton

John C. Heaton, Joseph L. Gidwitz Professor of Finance; Deputy Dean for Faculty, studies asset pricing, portfolio allocation, and time-series economics. His research in these areas has earned him numerous fellowships, including an Alfred P. Sloan Research Fellowship, a National Science Foundation Fellowship, and a Provost Fund Fellowship from Massachusetts Institute of Technology (MIT).

Tobias J. Moskowitz

Tobias J. Moskowitz, Fama Family Professor of Finance, was recognized by the American Finance Association with its 2007 Fischer Black Prize, which honors the top finance scholar under the age of 40. The award cited his "ingenious and careful use of newly available data to address fundamental questions in finance."

Lubos Pastor

Lubos Pastor, Charles P. McQuaid Professor of Finance, focuses his research mostly on financial markets and asset management. His latest work analyzes the effects of political uncertainty on asset prices. He has also written on a broad range of topics such as liquidity risk, stock price bubbles, portfolio choice, performance evaluation, stock volatility, return predictability, technological revolutions, and IPOs. He has analyzed various effects of parameter uncertainty and learning in finance.

Raghuram G. Rajan

Raghuram G. Rajan, Eric J. Gleacher Distinguished Service Professor of Finance, served as chief economist at the International Monetary Fund between 2003 and 2006. He is the author, along with fellow GSB faculty member Luigi Zingales, of the book Saving Capitalism from the Capitalists. He received the inaugural Fischer Black Prize in 2003.

Pietro Veronesi

Pietro Veronesi, Roman Family Professor of Finance, conducts research that focuses on asset pricing, stock and bond valuation under Bayesian uncertainty and learning, stock market bubbles and crashes, return predictability and stochastic volatility, and equilibrium models on political uncertainty and asset prices. Veronesi is a research associate of the National Bureau of Economic Research and a research fellow of the Center for Economic and Policy Research.

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