FIN41640 Financial Theory

Academic Year 2019/2020

The course offers an in depth study of the theoretical foundations of modern financial economics, with a focus on investments and capital markets. The course will cover the central themes of modern finance including individual investment choice theory, equilibrium asset pricing, option pricing and the potential application of these themes.
Upon completion of this course students are expected to have a clear understanding of the major theoretical results concerning individuals' consumption and portfolio decisions under uncertainty and their implications for the valuation of securities.

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Curricular information is subject to change

What will I learn?

Learning Outcomes:

Describe and use fundamental principles and concepts in finance.
Use key skills in financial decision making.
Contrast fundamental asset pricing theories.
Critically assess financial theories and models.
Appraise the relationship between risk and return.
Develop research skills such as reading of research articles.

Indicative Module Content:

Topic 1: Review of the Microeconomic Foundations of Financial Economics
Consumption and Investment without and with Capital Markets

Topic 2: Investment Decisions: The Certainty Case
Fisher Separation Theorem
Shareholder Wealth Maximisation
Overview of Capital Budgeting Techniques: NPV and IRR

Topic 3: Making Choices in Risky Situations
Utility Theory
Risk Aversion
Stochastic Dominance
State Preference Theory
Mean Variance Portfolio Theory

Topic 4: Equilibrium Pricing
Capital Asset Pricing Model
Arbitrage Pricing Theory

Topic 5: The Term Structure of Interest Rates

How will I learn?

Student Effort Type	Hours
Lectures	24
Specified Learning Activities	17
Autonomous Student Learning	126
Total	167

Am I eligible to take this module?

Requirements, Exclusions and Recommendations

Not applicable to this module.

Module Requisites and Incompatibles

Not applicable to this module.

How will I be assessed?

Assessment Strategy

Description	Timing	Open Book Exam	Component Scale	Must Pass Component	% of Final Grade
Examination: This is the end of term examination.	2 hour End of Trimester Exam	No	Graded	No	70
Continuous Assessment: Involves the evaluation of a student's progress and attainment throughout the course of delivery of a module.	Unspecified	n/a	Graded	No	25
Attendance: The student is allowed to miss 2 lectures without penalty. Missing 3-4 lectures results in a 50% grade reduction and missing 5 or more lectures results in No Grade.	Throughout the Trimester	n/a	Graded	No	5

Carry forward of passed components
Yes

What happens if I fail?

Resit In	Terminal Exam
Spring	Yes - 2 Hour

Assessment feedback

Feedback Strategy/Strategies

• Group/class feedback, post-assessment

How will my Feedback be Delivered?

Not yet recorded.

Associated Staff

Name	Role
Ms Ekaterina Goryagina	Tutor