Financial Theory and Models (F)

Course content

The course introduces tools for the analysis of both discrete and continuous time asset pricing models.  Methods to price derivaties under a no-arbitrage condition are studied and applied. Various interest rate models are introduced. Models for risky debt and optimal capital structure are studied. The appropriate mathematical tools are introduced and explained in the course.

Education

MSc programme in Economics – elective course

 

Bacheloruddannelsen i økonomi – valgfag på 3. år

The Danish BSc programme in Economics - elective at the 3rd year

 

The course is part of the Financial line at the MSc programme in Economics,  symbolized by ‘F’.

Learning outcome

After completing the course the student is expected to be able to:

 

Knowledge:

  • Identify, describe and discuss core problems in the rigorous modeling of basic financial notions.
  • Account for the main technical tools used in rigorous modeling of discrete and continuous time economics.
  • Account for the main concepts of financial economics.
  • Assess and discuss both benefits and deficiencies of the applied methods and models under scrutiny.

 

Skills:

  • Correctly select and apply core models to analyze problems in finance.
  • Master the analysis of a given problem in finance by selecting and correctly applying the pertinent tools.
  • Engage in academic discussions of financial economics and to assess both results and deficiencies of the applied models in a broader context of economics and society.

 

Competencies:

  • Apply the acquired skills to new areas of analysis in both financial economics as well as in broader fields of economics.
  • Master and modify the studied tools and methods in new situations.
  • Apply the acquired skills as stepping stones to more advanced models and topics in finance and economics.

Lectures supported by supplemental lectures and exercises

Restrictions due to Coronavirus:
The teaching in this course may be changed to be taught either fully or partly online due to COVID-19. For further information, please see the course room on Absalon (for enrolled students).

Text book: Tomas Björk. Arbitrage Theory in Continuous Time. Oxford Finance Series, 3rd Edition.

 

Supplementary teaching material and exercise lists provided by the teacher.

The student will benefit from attending "Corporate Finance and Incentives" from the study of Economics before or at the same time as the course.

The student should have a sound knowledge of markets and prices from a similar course as "Microeconomics I" from the Bachelor of Economics.

The student should have a basic knowledge of probability from a similar course as "Probability Theory and Statistics" from the Bachelor of Economics.

For non-economic student it is recommended to have followed similar courses as "Business Economics", "Mathematics A" and "Mathematics B" from the Bachelor of Economics before or at the same time as "Financial Theory and Models".

Schedule:
2 hours lectures once a week from week 36 to 50 (except week 42).
2 hours exercise classes once a week from week 36 to 50 (except week 42).

Schema:
The overall schema for the BA 3rd year and Master can be seen at KUnet:
MSc in Economics => "Courses and teaching" => "Planning and overview" => "Your timetable"
BA i Økonomi/KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"

Timetable and venue:
To see the time and location of lectures please press the link under "Timetable"/​"Se skema" at the right side of this page. E means Autumn.

You can find the similar information partly in English at
https:/​/​skema.ku.dk/​ku2122/​uk/​module.htm
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E21; [Name of course]””
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn”
Press: “ View Timetable”

Please be aware:
- The schedule of the exercise classes is only a pre-planned schedule and can be changed until the teaching begins without the participants´ acceptance. If this happens you can see the new schedule in your personal timetable at KUnet, in the app myUCPH and through the links in the right side and the link above.
- It is the students´s own responsibility to continuously update themselves about their studies, their teaching, their schedule, their exams etc. through the curriculum of the study programmes, the study pages at KUnet, student messages, the course descriptions, the Digital Exam portal, Absalon, the personal schema at KUnet and myUCPH app etc.

Oral
Collective
ECTS
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
as an ITX-exam in the exam venues of the university.

The exam assignment is in English and must be answered in English.

Changes due to Coronavirus:
In the event that COVID-19 restrictions may affect the conduction of the ITX-exams, the written exam and the re-sit exam will be changed to a 3,5 hours take-home exam with all aids. If done so, the changes will be announced in study messages at KUnet, in the Digital Exam portal and here in the Exam section of the course description.

The take-home exams will still be individual and it is not allowed to communicate with any one about the exam assignment nor the solution at all. It is also prohibited to distribute data and other information at all. If this or alike actions happens, it will be regarded as cheating and plagiarism.
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Aid

All written aids allowed at the written ITX-exams.

 

If the ITX-exams are changed to take-home exams due to COVID-19, the written take-home exams will be with all aids.

 

For further information about allowed aids for the re-examination, please go to the section "Re-exam".

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Marking scale
7-point grading scale
Censorship form
No external censorship
at the written exams. The written ITX-exam may be chosen for external assessment by random sample.

An oral re-examination may be with external assessment.
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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
  • Preparation
  • 161
  • Exam
  • 3
  • English
  • 206