FIN30150 Financial Economics I

Academic Year 2022/2023

This module covers the following range of topics in financial economics that model the trade off between risk and expected return: utility theory, portfolio theory, the capital asset pricing model, arbitrage pricing theory, and factor models.

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Curricular information is subject to change

Learning Outcomes:

On completing this module students will be expected to be able to:
a) Appraise the theoretical and mathematical models used in financial economics.
b) Describe the trade off between risk and expected return and the key concepts in financial economics such as diversification, equilibrium and arbitrage.
c) Evaluate the application of financial models to real world market data in determining risk and expected return.
d) Critically analyse the role of financial economic models in modelling various aspects of financial markets.

Indicative Module Content:

Choices in the Presence of Uncertainty:
* Utility functions
* Expected utility
* Certainly equivalence
* Risk aversion
* Stochastic dominance
* Connections between utility theory and stochastic dominance

Modern Portfolio Theory
* Mean-variance optimisation
* Inclusion of the risk-free rate
* Separation theorems – one and two fund theorems

Capital Asset Pricing Model (CAPM)
* Market equilibrium
* Pricing model
* Security and capital market lines

Factor Models and Arbitrage Pricing Theory (APT)
* Single factor models
* CAPM as a factor model
* Connections between CAPM and APT
* Multifactor models
* Reduction of parameters in mean-variance optimisation

Student Effort Hours: 
Student Effort Type Hours
Lectures

24
Tutorial

12
Specified Learning Activities

24
Autonomous Student Learning

65
Total

125
Approaches to Teaching and Learning:
My approach to teaching and learning is to deliver a mix of learning environments so that students attain coverage of the fundamentals but are also exposed to a variety of other learning environments to stimulate active learning. From my large lectures that focus on theories and their application, to delivering small group tutorial classes that focus on problem solving and student presentations. My objective is to foster in students the ability to interpret, explain, apply, critically evaluate, and present the main models and theories of finance and the ability to use these models and theories in an informed manner in real world settings. 
Requirements, Exclusions and Recommendations

Not applicable to this module.


Module Requisites and Incompatibles
Incompatibles:
ECON30170 - Intermediate Financial Econ

Equivalents:
Financial Economics 2 (FIN30140)


 
Assessment Strategy  
Description Timing Open Book Exam Component Scale Must Pass Component % of Final Grade
Continuous Assessment: Group project on the application of financial economics model to financial data Throughout the Trimester n/a Graded No

25
Continuous Assessment: Individual project on the application of financial economic models to data. Throughout the Trimester n/a Graded No

15
Examination: This will be an end of semester final exam with a mix of descriptive, theoretical, and mathematical exam questions. 2 hour End of Trimester Exam No Graded No

60

Carry forward of passed components
Yes
 
Resit In Terminal Exam
Spring Yes - 2 Hour
Please see Student Jargon Buster for more information about remediation types and timing. 
Feedback Strategy/Strategies

• Group/class feedback, post-assessment
• Online automated feedback

How will my Feedback be Delivered?

Not yet recorded.

Name Role
Mr Tianshu Jiang Tutor