Financial Economics (2215.YR.002882.2)
General information
Type: |
OBL |
Curs: |
2 |
Period: |
S semester |
ECTS Credits: |
6 ECTS |
Teaching Staff:
| Group |
Teacher |
Department |
Language |
| Year 2 |
Santiago Forte Arcos |
Economía, Finanzas y Contabilidad |
CAT, ESP |
Prerequisites
Core and compulsory courses in Accounting and Financial Analysis, Mathematics, Statistics and Economics.
Previous Knowledge
Geometric series, limits, derivatives, Taylor expansion and basic statistical concepts (mean, variance, and correlation coefficient)
Workload distribution
Workload distribution:
Lectures: 27.5 hours
Participatory sessions: 22.5 hours
Independent study: 97 hours
Exams: 3 hours
COURSE CONTRIBUTION TO PROGRAM
Financial markets serve as the framework to balance the supply and demand of the economy's available financial resources. Given that any economic activity requires financing, knowing how those financial markets as well as the assets negotiated within them work is a cornerstone of the education of any Business Administration undergraduate degree programme.
Course Learning Objectives
Upon completing this course students should be able to:
- Identify the basic characteristics of the range of financial instruments.
- Evaluate the different financial instruments.
CONTENT
1. Financial mathematics 1.1. Introduction: Basic concepts; 1.2. Types of financial laws; 1.2.1. Simple capitalisation and discounts; 1.2.2. Compound capitalisation and discount; 1.3. Income; 1.3.1. Classification; 1.3.2. Valuation ; 1.4. Inflation; 1.5. Fractional capitalisation of interest; 1.6. Loan amortisation; 1.7. Investment selection criteria: NPV, IRR, Payback; 1.7.1. Net Present Value (NPV) criteria: The criterion: 1.7.2. Payback criteria; 1.7.3. Internal Rate of Return (IRR) criteria
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2. Fixed income 2.1. Introduction; 2.2. Fixed income profit; 2.2.1. Internal Rate of Return (IRR): The yield curve; 2.2.2. Term Structure of Interest Rates: TSIR; 2.2.3. Forward types; 2.3. Valuation; 2.4. Risk measures; 2.4.1. Duration; 2.4.2. Convexity; 2.5. Corporate fixed income
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3. Portfolio theory 3.1. Asset return and risk; 3.2. Portfolio return and risk; 3.3. Diversification effect; 3.4. Efficient portfolios: the Markowitz model; 3.5. Generalisation of the Markowitz model: the risk-free asset; 3.6. Estimation of the efficient frontier; 3.7. Capital Asset Pricing Model (CAPM); 3.7.1. Market equilibrium: Capital Market Line; 3.7.2. Asset equilibrium: Security Market Line; 3.8. The CAPM and valuation of variable Income: The dividend method; 3.9. Practical problems with CAPM implementation
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4. Financial derivatives 4.1. Forwards; 4.2 Options |
Relation between Activities and Contents
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3 |
4 |
| Lectures |
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| Participatory sessions |
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| Final exam |
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Methodology
Lecture and participatory session activities:
Lecture classes: Faculty will combine theoretical explanations with exercises.
Participatory sessions: Students have to turn in their exercise solutions prior to each session. During the latter, the class will discuss the different solutions proposed, faculty will resolve questions and doubts and students will sit short tests.
ASSESSMENT
ASSESSMENT BREAKDOWN
| Description |
% |
| Participatory sessions |
27 |
| Final exam |
73 |
Assessment criteria
First and second sitting of the final exam: in addition to an average mark of 5 out of 10 in participatory session activities (27%) and the final exam (73%), students must earn a mark of at least five during the first sitting of the final exam to pass the course.
The criteria used to determine students' final marks is as follows:
If students' average marks prior to the final exam and their marks on the final exam are both above 5, the average of the two marks will be their final marks for the class. Contrarily, the lower of the two marks will be their final marks for the class.
Students registered only to re-sit the final exam: Students' marks on the re-sit exam will represent 100% of their final marks.
Bibliography
Short bibliography:
Class material.
Additional bibliography and material:
-Bodie, Kane and Marcus, Investments, McGraw-Hill, 2011.
-Brealey-Myers, Principios de Finanzas Corporativas, McGraw-Hill, 2003.
-Fabozzi, Fixed Income Mathematics, McGraw-Hill, 1997.
-Miner, Curso de Matemática Financiera, McGraw-Hill, 2003.
-Ross, Westerfield, Jafee, Finanzas Corporativas, Irwin, 1999.
Timetable and sections
| Group |
Teacher |
Department |
| Year 2 |
Santiago Forte Arcos |
Economía, Finanzas y Contabilidad |
Timetable Year 2
From 2022/2/1 to 2022/4/6:
From Tuesday to Wednesday from 10:45 to 13:15. (Except: 2022/3/15 and 2022/3/16)
From 2022/4/26 to 2022/5/4:
From Tuesday to Wednesday from 10:45 to 13:15. (Except: 2022/5/3 and 2022/5/4)
Each Wednesday from 9:00 to 11:00. (Except: 2022/4/27)
Wednesday2022/5/18:
From 8:45 to 12:00.
From 8:45 to 12:45.
Monday2022/7/4:
From 14:45 to 18:45.
From 14:45 to 18:00.
