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EC333: Topics in Financial Economics: Theories and International Finance

  • Farzad Javidanrad

    Module Leader
15 CATS - Department of Economics
Autumn Module

Principal Aims

EC333-15 Topics in Financial Economics: Theories and International Finance

Principal Learning Outcomes

Subject knowledge and understanding: … Understand key concepts in finance and corporate finance and exchange rate determinations.The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study, background reading. The summative assessment methods that measure the achievement of this learning outcome are: Final examination Subject knowledge and understanding: Demonstrate knowledge of asset pricing, corporate financial policy and governance.The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study, background reading. The summative assessment methods that measure the achievement of this learning outcome are: Final examination Subject knowledge and understanding: Abstract and simplify basic economic problems through the application of simple theoretical methods.The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study, background reading. The summative assessment methods that measure the achievement of this learning outcome are: Final examination Key skills:Communicate knowledge and understanding of economics in written and in elementary mathematical forms.The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study, background reading. The summative assessment methods that measure the achievement of this learning outcome are: Final examination Key skills:Conduct individual and collaborative research into a finance topic, using world wide web and library resources.The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study, background reading. The summative assessment methods that measure the achievement of this learning outcome are: Final examination Professional skills: Select and apply appropriate models and techniques to particular problems, especially those of a policy nature. Cognitive skills:… Analyse and formulate models for understanding and solving problems.The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study, background reading. The summative assessment methods that measure the achievement of this learning outcome are: Final examination Cognitive skills:Analyse competing models and hypotheses in a critical way.The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study, background reading. The summative assessment methods that measure the achievement of this learning outcome are: Final examination Professional skills: Produce concise and analytical reports relating to financial problems and issues.The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, independent study, background reading. The summative assessment methods that measure the achievement of this learning outcome are: Final examination

Syllabus

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

Context

Optional Module
GL11 - Year 3, GL12 - Year 4, L100 - Year 3, L103 - Year 4, L116 - Year 3, L1P5 - Year 1, L1PA - Year 1, LM1D (LLD2) - Year 3, LM1H - Year 4, V7ML - Year 3, V7MM - Year 4, V7MP - Year 3, V7MR - Year 3, LA99 - Year 3, R9L1 - Year 4, R3L4 - Year 4, R4L1 - Year 4, R2L4 - Year 4, R1L4 - Year 4, L1L8 - Year 3
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.
Restrictions
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

Assessment Method
2 hour examination (Summer) (100%)
Coursework Details
2 hour examination (Summer) (100%)
Exam Timing
Summer

Exam Rubric

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. A formula sheet is provided.

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.

Reading Lists