Powerful Money: Hedge Funds, Leverage and Risk

Michael Roberts – Wharton School of the University of Pennsylvania

Finance is often viewed as an intimidating subject laden with jargon and mathematics that can mask the beauty and practicality of the subject. The truth is that finance is based on a few principles that are easy to understand and fun to apply. This class will introduce some of these principles – arbitrage, leverage, risk and return – using a popular institutional trading strategy as an illustrative vehicle.

We will begin by presenting the strategy in a stylized setting that is void of financial jargon to provide the intuition for these principles. We will then draw parallels from this setting to the financial markets in which these principles operate, closing the session by highlighting the widespread applicability of these principles. The goal of the course is to demystify finance by breaking it down into its fundamental building blocks. In doing so, students will exit the course understanding several key concepts in finance and their application, as well as with a better ability to "think financially."