To equip students with an understanding of fundamental concepts in modern finance; to develop a range of appropriate analytical skills, including dynamic and theoretic methods; to develop in students the capacity to apply analytical techniques to real world problems.
Principal Learning Outcomes
By the end of the module the student should be able to understand key concepts in finance and corporate finance and exchange rate determinations. Demonstrate knowledge of asset pricing, corporate financial policy and governance. Abstract and simplify basic economic problems through the application of simple theoretical methods.
The module will typically cover the following topics:
a) Portfolio selections in a mean variance framework
b) Capital Asset Pricing Model (CAPM)
c) Applications and implications of the CAPM
d) Arbitrage pricing theory
e) Option pricing- from the Binomial model to Black and Scholes
f) Derivatives and no arbitrage conditions
g) Derivatives and no arbitrage conditions in the foreign exchange market
- Optional Module
- LM1D (LLD2) - Year 3, L116 - Year 3, V7ML - Year 3, LA99 - Year 3, L100 - Year 3, L1L8 - Year 3, R9L1 - Year 4, R3L4 - Year 4, R4L1 - Year 4, R2L4 - Year 4, R1L4 - Year 4, V7MM - Year 4, V7MP - Year 3, L1P5 - Year 1, L1PA - Year 1, V7MR - Year 3, LM1H - Year 4, GL12 - Year 4, GL11 - Year 3, L103 - Year 4
- Pre or Co-requisites
- The module will cover the most important models in modern finance (CAPM and option pricing) in a very rigorous manner. For that purpose students must feel comfortable with the required mathematical tools. In particular, students must have good command of linear algebra (matrices and vectors), maximization with and with without constraints and basic concepts in probability and statistics. Pre-requisites: Core first- and second-year Economics modules, i.e. either EC121 or EC123 and either EC204 or EC201 and EC202. Students who have taken IB253 are not permitted to take this module.
- Students who have taken IB253 are not permitted to take this module. Not available to non-final year students on Economics-based degrees.
- Part-year Availability for Visiting Students
- Not available on a part-year basis
- Assessment Method
- 2 hour exam (100%)
- Exam Timing
Time Allowed: 2 hours
Answer the ONE question in Section A and ONE question from Section B. All questions carry equal weight (50 marks). Answer Section A questions in one booklet and Section B questions in a separate booklet.
Approved pocket calculators are allowed.
Read carefully the instructions on the answer book provided and make sure that the particulars required are entered on each answer book. If you answer more questions than are required and do not indicate which answers should be ignored, we will mark the requisite number of answers in the order in which they appear in the answer book(s): answers beyond that number will not be considered.
Previous exam papers can be found in the University’s past papers archive. Please note that previous exam papers may not have operated under the same exam rubric or assessment weightings as those for the current academic year. The content of past papers may also be different.