Financial Decision Making (F,p)
Course content
Financial Decision Making (formerly “Corporate Finance and Incentives”) is the Economics program’s central course on Finance. Financial Decision Making gives a broad overview of the core matter of the field. Building on earlier relevant courses from the Bachelor’s program in Economics, this course provides the common ground for later elective Finance courses. The aim of the course is to provide some required tools and especially the intuition on how to evaluate portfolios, assets, derivatives as well as projects investment and capital structure decisions.
The course develops your understanding of the different asset classes in financial markets, including bonds, stocks, and options. Based on considerations of investor demand, we introduce standard asset pricing methods. The asset pricing models include the Capital Asset Pricing Model (CAPM), the Arbitrage Pricing Theory (APT), and risk-neutral pricing. In this context, we discuss the core concept of arbitrage-free markets, market efficiency, and investor behavior. We apply the asset pricing methodology to derive the Black-Scholes option pricing equation, analyze the choice of investment projects inside firms, and the management of real options. Turning to classic corporate finance issues, the course explores the optimal capital structure of the firm, optimal dividend policy, risk management, and the incentives of the firm’s management.
Excel is used to solve empirical problems in these areas, specifically in the context of portfolio management.
MSc programme in Economics – elective course
The course is part of the Financial line at the MSc programme in Economics, symbolized by ‘F’.
Bacheloruddannelsen i økonomi – Prioriteret valgfag på 3. år (angivet med et p)
The Danish BSc programme in Economics - prioritized elective at the 3rd year (symbolized by ‘p’).
The course is open to:
- Exchange and Guest students from abroad
- Credit students from Danish Universities
- Open University students
After completing the course the student is expected to be able to:
Knowledge:
- Identify, describe and discuss financial problems encountered by firms and investors.
- Account for the core asset pricing models as well as how to apply these methods in standard contexts for financial decision-making.
- Describe the implementation of standard mean-variance efficient portfolio rules.
- Account for and, on a scientific basis, reflect on the role of arbitrageurs for the functioning of financial markets.
- Explain the standard models of agency conflicts and asymmetric information that shape financial arrangements for corporations.
- Explain and discuss the determinants of option prices.
- Identify scientific issues with respect to implementing the theoretical models into practice.
Skills:
- Select and apply core models and methodologies for portfolio choice and asset pricing analysis in standard Finance setups, partly using Excel.
- Master the analysis of given problems, assess models and results, putting results into perspective.
- Argue about problems in financial decision-making and issues in a scientific and professional manner, drawing upon the relevant knowledge of the field.
- Communicate research-based knowledge and discuss professional issues with both, academic peers and non-specialists.
Competences:
- Apply the achieved knowledge and skills to new formal problems.
- Select and evaluate solutions to complex, unpredictable situations in financial markets or corporations.
- Apply more advanced models and methodologies to novel topics in Finance.
- Criticize and reflect upon the main models in Finance, relating them to current issues in financial markets and corporate finance.
It is expected that the students read the syllabus material
before the lecture in order to engage in informed discussions
during lectures. The lectures only briefly recap the core concepts
of the material from the syllabus. The focus of the lectures is to
discuss the prepared material by relating the concepts to current
research on an international level or to economic developments and
by applying the methods within a relevant research-based context.
An integral part of this course is the weekly exercise class. The
exercise sets will become available through Absalon a week in
advance of the exercise class. It is expected that before each
session the students solve the problems and prepare to present
their solutions on the whiteboard. Problem-solving helps to realize
which parts of the syllabus are harder to learn, so working with
the exercises provides the best chance to understand the course
material deeply. The role of the teaching assistant is to
facilitate the discussion during and after the presentation to
ensure that there is time to bring up alternative solutions, to
answer open questions, or to give assistance when something turns
out to be problematic.
Office hours: The lecturer offers regular office hours (The date
and location is announced during the first lecture)
The main textbook for the course:
- Jonathan Berk and Peter DeMarzo: Corporate Finance, Sixth Edition, Global Edition, Pearson.We provide supplementary shorter texts and current media clippings for in-class discussions through Absalon.
- Peter Norman Sørensen (2019): "Lecture Notes on Asset Pricing," available through Absalon.
It is recommended to have followed the course "Business
Economics" (Erhvervsøkonomi) or similar, at the Bachelor of
Economics, University of Copenhagen, before attenting the course.
It is recommended to have followed the course "Probability
Theory and Statistics" (Sandsynlighedsteori og Statistik) or
similar, at the Bachelor of Economics, University of Copenhagen,
before attenting the course.
It is recommended to have followed the courses Microeconomics I and
II or similar, at the Bachelor of Economics, University of
Copenhagen, before attenting the course.
Schedule:
2 hours lectures 1 or 2 times a week from week 36 to 50 (except
week 42).
2 hours exercise classes a week from week 36/37 to 50 (except week
42).
The teaching assistants give the students individual feedback while they present their solutions.
The lecturer gives collective oral feedback at the quizzes the students make in the lectures.
for enrolled students: Rules etc at Master(UK), Master(DK) and Bachelor(DK)
When registered you will be signed up for exam.
- Full-degree students – sign up at Selfservice on KUnet
- Exchange and guest students from abroad – sign up through Mobility Online and Selfservice- read more through this website.
- Credit students from Danish universities - sign up through this website.
- Open University students - sign up through this website.
The dates for the exams are found here Exams – Faculty of Social Sciences - University of Copenhagen (ku.dk)
Please note that it is your own responsibility to check for overlapping exam dates.
- ECTS
- 7,5 ECTS
- Type of assessment
-
On-site written exam, 3 hours under invigilation
- Type of assessment details
- ITX-exam in the exam venues of the university.
The exam is in the form of a Multiple-Choice exam. - Examination prerequisites
-
To qualify for the exam the student must during the semester and not later than the given deadlines
- hand in and have approved at least one multiple-choice question with answers for at least 75% out of all lecture blocks (which will be defined in the beginning of the semester). The questions have to be uploaded the latest 2 weeks after the lecture block ends. There will be direct feedback from the teaching assistants and peers on the validity of the proposed questions and answers.
- Aid
- No aids allowed
- Marking scale
- 7-point grading scale
- Censorship form
- No external censorship
- Exam period
-
Exam information:
The examination date can be found in the exam schedule here
The exact time and place will be available in Digital Exam from the middle of the semester.
More information about examination, rules, aids etc. at Master(UK), Master(DK) and Bachelor(DK).
- Re-exam
-
Same as the ordinary exam.
- You must hand in at least 1 multiple-choice question with answers for at least 75% out of all lectures for qualifying to the reexam.
Reexam information:
The reexamination date/period can be found in the reexam schedule here
Exact day, time and place is available in Digital Exam in February.
More info: Master(UK), Master(DK) and Bachelor.
Criteria for exam assessment
Students are assessed on the extent to which they master the learning outcome for the course.
In order to obtain the top grade "12", the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.
In order to obtain the passing grade “02”, the student must in a satisfactory way be able to demonstrate a minimal acceptable level of the knowledge, skills and competencies listed in the learning outcomes.
Single subject courses (day)
- Category
- Hours
- Lectures
- 42
- Class Instruction
- 28
- Preparation
- 133
- Exam
- 3
- English
- 206
Kursusinformation
- Language
- English
- Course number
- AØKA08242U
- ECTS
- 7,5 ECTS
- Programme level
- Full Degree Master
Bachelor
- Duration
-
1 semester
- Placement
- Autumn
- Price
-
Information about admission and tuition fee: Master and Exchange Programme, credit students and guest students (Open University)
- Studyboard
- Department of Economics, Study Council
Contracting department
- Department of Economics
Contracting faculty
- Faculty of Social Sciences
Course Coordinator
- Stefan Voigt (12-7b7c6d6e6976367e77716f7c486d6b777636737d366c73)
Teacher
See 'Course Coordinators'
Se skema
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