ES22024: Financial economics
[Page last updated: 03 June 2024]
| Academic Year: | 2024/25 |
| Owning Department/School: | Department of Economics |
| Credits: | 10 [equivalent to 20 CATS credits] |
| Notional Study Hours: | 200 |
| Level: | Intermediate (FHEQ level 5) |
| Period: |
- Academic Year
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| Assessment Summary: | CWOG 50%, EXCB 50% |
| Assessment Detail: |
- Unseen exam (EXCB 50%)
- Group project (CWOG 50%)
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| Supplementary Assessment: |
- Like-for-like reassessment (where allowed by programme regulations)
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| Requisites: |
Before taking this module you must ( take ES12001 AND take ES12002 )
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| Learning Outcomes: |
At the end of the unit, students will be able to:
- Analyse and solve an optimal investment decision problem.
- Compute efficient portfolios.
- Derive and use the CAPM.
- Price financial options and options portfolios.
- Compute default probabilities and credit risk spreads.
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| Synopsis: | "Gain introductory knowledge of the concepts and theoretical frameworks at the foundation of financial economics.
You will learn about the main financial assets and tools of analysis for understanding assets values and uses.
The two main areas of focus through this unit are investment decision problems, and the pricing framework of financial assets.
"
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| Content: | The unit content is articulated in two main parts: 1) investment decision making and portfolio theory, and 2) arbitrage theory and derivatives pricing. Here is the content of the two parts:
1. Investment decision making and portfolio theory:
- Introduction to expected utility theory
- Decision making under risk or uncertainty
- Mean-variance analysis and efficient portfolios
- The Capital Pricing Model analytical framework
- Factors models and Arbitrage Pricing Theory (APT)
- The general theory of arbitrage
2. Asset pricing:
- Bonds pricing and interest rates
- Financial derivatives
- Portfolios of options and options trading
- The binomial model
- The Black-Scholes-Merton model
- Credit risk pricing and credit derivatives
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| Course availability: |
ES22024 is Optional on the following courses:
Department of Economics
- UHES-AFB10 : BSc(Hons) Economics (Year 2)
- UHES-AFB11 : BSc(Hons) Economics with Politics (Year 2)
- UHES-AKB11 : BSc(Hons) Economics with Politics with professional placement (Year 2)
- UHES-AKB11 : BSc(Hons) Economics with Politics with professional placement and study abroad (Year 2)
- UHES-AKB11 : BSc(Hons) Economics with Politics with study abroad (Year 2)
- UHES-AKB10 : BSc(Hons) Economics with professional placement (Year 2)
- UHES-AKB10 : BSc(Hons) Economics with professional placement and study abroad (Year 2)
- UHES-AKB10 : BSc(Hons) Economics with study abroad (Year 2)
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Notes: - This unit catalogue is applicable for the 2024/25 academic year only. Students continuing their studies into 2025/26 and beyond should not assume that this unit will be available in future years in the format displayed here for 2024/25.
- Courses and units are subject to change in accordance with normal University procedures.
- Availability of units will be subject to constraints such as staff availability, minimum and maximum group sizes, and timetabling factors as well as a student's ability to meet any pre-requisite rules.
- Find out more about these and other important University terms and conditions here.
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