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Module Specifications

Current Academic Year 2012 - 2013
Please note that this information is subject to change.

Module Title Financial Economics
Module Code EF5121
School DCUBS
Online Module Resources

Module Co-ordinatorSemester 1: Valerio Poti
Semester 2: Niall O'Sullivan
Autumn: Valerio Poti
NFQ level 8 Credit Rating 5
Pre-requisite None
Co-requisite None
Compatibles None
Incompatibles None
Description
The aim of this course is to provide students with a thorough foundation in the principles of financial theory and to develop a critical approach to the discipline. This starts with utility theory and risk-return relationship with different risk measures. Students will develop an understanding of portfolio diversification leading to the development of the Capital Asset Pricing Model as well as an investigation of the arbitrage prcing theory. Students will also explore the more recent developments including the development of the Fama-French three factor model and behavioural finance.

Learning Outcomes
1. Describe and use fundamental principles and concepts in finance
2. Appraise the relationship between risk and return
3. Examine the pricing of assets
4. Use key skills in financial decision making
5. Critically assess financial theories and models



Workload Full-time hours per semester
Type Hours Description
Lecture24No Description
Independent learning24Assigned readings
Independent learning24Problem sets
Independent learning13Preparing for in-class multiple choice test
Independent learning40Exam preparation
Total Workload: 125

All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml

Indicative Content and Learning Activities
Utility theory.
Basic axioms of utility theory, indifference curves, certainty equivalents, risk-reward trade-off and the concept of risk aversion..

State Preference Theory.
Optimal portfolio decisions, portfolio optimality conditions and Fisher Separation..

Mean-Variance uncertainty.
Measuring risk and return for a single asset and portfolio of assets. Optimal portfolio choice with risky assets and the risk-free rate of interest..

Asset Pricing.
Capital Asset Pricing Model and Arbitrage Pricing Theory. Efficiency of the market portfolio, Beta, systematic and unsystematic risk..

Efficient Capital Market Theory.
Random walk model, categories of efficiency, empirical review, technical analysis, issues in Behavioural Finance..

Interest Rates, Term Structure and the Bond & Money Market.
Monetary transmission mechanism, interest rate arithmetic, term structure, bonds.

Foreign Exchange Market.
Arbitrage relations in the FOREX Market, PPP, CIP, UIP, FX Models.

Assessment Breakdown
Continuous Assessment0% Examination Weight100%
Course Work Breakdown
TypeDescription% of totalAssessment Date
AssignmentIn-class multiple choice test30%Week 5
Reassessment Requirement
Resit arrangements are explained by the following categories;
1 = A resit is available for all components of the module
2 = No resit is available for 100% continuous assessment module
3 = No resit is available for the continuous assessment component
This module is category 1
Indicative Reading List
  • Cuthbertson, K. and D. Nitzsche, 2004, Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange, 2nd edition [ISBN: 978-0-470-09171-5]: 0,
  • Luemberger, D.G., 1997, Investment Science, Oxford University Press.: 0,
  • Danthine, J.P. and J.B. Donaldson, Intermediate Financial Theory, 2nd edition, Elsevier, 2007.: 0,
Other Resources
None
Array
Programme or List of Programmes
MFCMMSc in Finance
Timetable this semester: Timetable for EF5121
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