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ECON7002 - Economics of Finance

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This module is available in Term 1


Aims:

The aim of this course is to provide a comprehensive introduction to the modern theory of finance. The module will cover the most important theories explaining the formulation of prices of financial assets and the role of financial markets in the optimal allocation of risk bearing.  Students will develop an understanding of the economics and characteristics of the main financial assets.

Objectives:

On successful completion of the module, students should be familiar with the basic principles and concepts in finance, including:

  • Equilibrium asset pricing and absence of arbitrage;
  • Optimal portfolio selection and Factor Pricing Models;
  • Derivatives and Corporate Finance.
Taught by:
Rodrigo Guimaraes
Assessment: 20 hours of lectures, 4 compulsory tutorial classes with 4 accompanying problem sets. 2-hour unseen written examination in Term 3. Affiliate students leaving in December will take a 2-hour written examination set up by the Department at the end of Term 1.
Suitable for:

Final year Economics (L100/L101), Econ/Geog (LL17), Phil/Econ (VL51), Econ/Stats (LG13), Math/Econ (G1L1/G1LC) and SCORE (GLN0) students.

2nd year students can also take this module but should note the pre-requisites below. The course is an application of the core microeconomic concepts to pricing under uncertainty so students less familiar with them will find the course very challenging (feedback from both non-economics and 2nd year economics students).

Prerequisites: Students should have taken, or be concurrently taking, ECON2001: Microeconomics or STAT3004: Decision and Risk. This module requires some knowledge of calculus, (computation of derivatives and simple constrained maximisation) and statistics (computation of expectations, covariance and variance), and students should be familiar with the concepts of marginal utility, marginal rates of substitution, computation of the competitive equilibrium economy and welfare analysis.
Maximum module enrolments: 150
Module Evaluation (Previous year): ECON7002
Moodle page:
ECON7002