FINANCIAL DECISIONS IN THE PUBLIC SECTOR

In the framework of a broad program of innovation, the public administration is faced with problems of financial decisions, both to procure resources for investments in the medium-long term and to employ its temporary liquidity. Objective of this course is to make the student capable of addressing and resolving these problems from the point of view of public administration.
Along the course we will also present swaps, a type of derivative that has been widely used in the course of the last twenty years by many public administrations, not always aware of the risks that this instrument entails. To comply with the more and more increasing digitization of the public administration, the course will introduce appropriate operative solutions using Excel or LibreOffice.

Knowledge and understanding:
• To know the different types of interest;
• To know the different types of annuities;
• To know different types amortizing loans;
• To know bonds and the bonds market behavior;
• To know the main derivatives asset classes, especially “swaps”.

Ability to apply knowledge and understanding:
• To be able to calculate simple interest, compound interest, principal for simple-interest and compound principal;
• To be able to amortize a debt, also by using amortization tables;
• To be able to calculate the present value of a bond;
• To be able to value an interest rate swap.

Ability to make judgements:
• Ability to choose the most suitable product to employ temporary liquidity;
• Ability to determine whether the interest related to a given product is correctly determined.

Certified good knowledge of English (level B2).

• Basics of interest rates
• Annuities
• Amortization of a debt
• Bonds
• Swaps

Compulsory textbooks:
• A. Basso, P. Pianca, Introduzione alla Matematica Finanziaria, Cedam, 2017, third ed., pp. 244, chapters 1-5 e 9, with the exception of sections 1.3, 2.4, 3.5, 3.6, 4.4, 4.7, 5.7, 9.5, 9.6, 9.7;
• J.C. Hull, Opzioni, futures e altri derivati, 9/Ed, Pearson, 2015, chapter 7 (from Sec. 7.1 to Sec. 7.7).

Additional reading matter for the financial functions in Excel:
• A. Basso, P. Ciurlia, R. GUSSO, Esercizi di Matematica Finanziaria su foglio elettronico Excel, Quaderno didattico del Dipartimento di Matematica Applicata n. 19/2006, Università Ca' Foscari Venezia;
• P. Bortot, S. Favaretto, S. Funari, Applicazioni con Excel alle decisioni finanziarie, vol. 8/2002, 2002, pp. 1-43;
• S. Benninga, Modelli finanziari. La finanza con Excel, second ed., 2010, chapter 32.

Grading is based on a final written exam, taken at the end of the course. This consists of 2 exercises to be solved and 10 closed-ended questions (duration: 2 hours). Each exercise accounts for 25% of the final grade of the exam; each question accounts for 5% of the final grade of the exam. The final grade will be the sum of the scores obtained in all exercises and questions.
The objective of the exercises is to test the student's ability to understand the computational aspects of the course and to apply them to compute the solution for a given problem. The objective of the closed-ended questions is to test the acquisition of the knowledge acquired and the ability to understand the financial products studied.
The exam is closed-notes and closed-book, but students are allowed to use a pocket calculator. Students need to register for the exam in advance.

Lectures, integrated by the use of a computer for the resolution of problems on a spreadsheet and homeworks assigned to students during the course.

Italian

written