Valid for: 2013/14
Decided by: Education Board B
Date of Decision: 2013-04-10
Elective for: F5, F5-fm, I4, I4-fir, Pi5, Pi5-fm
Language of instruction: The course will be given in English
The objective of this course is to give the students an understanding of well known ideas and theories within financial economics.
Knowledge and understanding
For a passing grade the student must
· the difference between complete and incomplete markets,
· the difference between diversifiable and non-diversifiable risk within a portfolio context,
· the derivation of CAPM,
· the role of arbitrage in the price determination of derivatives,
· the role of options in calculating net present values of investments,
· the role of information in price determination.
Competences and skills
For a passing grade the student must
Judgement and approach
For a passing grade the student must
develop an ability to pursue further studies in the field and to seek and evaluate information with a high degree of independence
The course contains the following building blocks
· investment decision under certainty: the risk free rate and Fisher-separability;
· risk aversion and expected utility;
· Arrow-Debreu securities;
· portfolio theory
· market equilibrium: CAPM and multi-factor equilibrium models;
· derivatives
· term structure of the interest rates;
· real options;
· efficient markets;
· information asymmetry and agent theory;
Grading scale: TH
Assessment: Students are evaluated in a written exam. In addition, quick quizes during the course give points that are added to the score on the exam. Points from quick quizes are only added to the score on the exam during the same term as the quick quizes were carried out.
The number of participants is limited to: 60
Selection: Credits awarded or credited within the study programme.
The course overlaps following course/s: NEKM25, NEKN81
Course coordinator: Frederik Lundtofte, frederik.lundtofte@nek.lu.se
Course homepage: http://www.nek.lu.se
Further information: Corresponds to NEKN81.