FIN30160 Financial Economics II

Academic Year 2023/2024

This module covers topics on the modelling of derivatives in financial economics. Topics include forwards, futures and swaps, models of asset price dynamics, arbitrage theory and replication arguments, valuation of derivative securities using the binomial model and the Black-Scholes model, exotic options, numerical methods for the valuation of exotic options, term structure modelling and credit risk modelling. The module endeavors to emphasize fundamental principles and to illustrate how these principles can be mastered and transformed into sound and practical solutions of actual investment problems.

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Curricular information is subject to change

What will I learn?

Learning Outcomes:

At the end of this course students should:

1. Have knowledge and comprehension in the theory and practice of derivatives, one of the most important areas of financial economics
2. Appraise one of the most important theories of modern finance, option pricing theory, and its implications for financial markets
3. Describe key concepts such as arbitrage, derivative replication and risk neutral valuation and recognize the practical usage, strengths and shortcomings of these methods
4. Explain the theory and practice of option pricing models, term structure models and credit risk models
5. Critique and back test option pricing models as applied to real world market data

How will I learn?

Student Effort Type	Hours
Lectures	24
Tutorial	12
Specified Learning Activities	24
Autonomous Student Learning	65
Total	125

Am I eligible to take this module?

Requirements, Exclusions and Recommendations

Not applicable to this module.

Module Requisites and Incompatibles

Incompatibles:
ECON30170 - Intermediate Financial Econ

Equivalents:
Fin Econ 1 (FIN30010)

How will I be assessed?

Assessment Strategy

Description	Timing	Open Book Exam	Component Scale	Must Pass Component	% of Final Grade
Group Project: Financial economic theory will be applied to real world financial problems	Varies over the Trimester	n/a	Alternative linear conversion grade scale 40%	No	30
Examination: Mathematical and descriptive questions	2 hour End of Trimester Exam	No	Alternative linear conversion grade scale 40%	No	40
Examination: Midterm Quizz Asessment	Week 7	No	Alternative linear conversion grade scale 40%	No	30

Carry forward of passed components
Yes

What happens if I fail?

Resit In	Terminal Exam
Autumn	Yes - 2 Hour

Assessment feedback

Feedback Strategy/Strategies

• Feedback individually to students, post-assessment
• Group/class feedback, post-assessment

How will my Feedback be Delivered?

Not yet recorded.

Associated Staff

Name	Role
Ms Nupur Garg	Tutor
Mr Karthik Varma Vadapalli	Tutor

When is this module offered?


Spring
Lecture	Offering 2	Week(s) - 20, 21, 22, 23, 24, 25, 26, 29, 30, 31, 32, 33	Tues 14:00 - 15:50
Tutorial	Offering 2	Week(s) - 20, 21, 22, 23, 24, 25, 26, 29, 30, 31, 32, 33	Wed 15:00 - 15:50
Spring