Financial Decision Making (F,p) (formerly Corporate Finance and Incentives)

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.

Education

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’).

 

Due to similarity in the Syllabus it is not allowed to take the course and the exam in "Financial Decision Making (AØKA08242U)", if the following former course already has been taken and passed: 

  • Corporate Finance and Incentives (AØKA08012U)

 

 

Learning outcome

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.

 

Competencies:

  • 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)

Changes to teaching methods due to a pandemic crisis:
The teaching in this course might be changed to either fully or partly online due to a pandemic crisis. If changes are implemented please read the study messages at KUnet or the announcements in the virtual course room on Absalon (for enrolled students).

The main textbook for the course:

  • Jonathan Berk and Peter DeMarzo: Corporate Finance, Fifth 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).

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 and exercise classes please press the link/links under "Timetable"/​"Se skema" at the right side of this page (E means Autumn). The lectures are shown in each link.

You can find the similar information partly in English at
https:/​/​skema.ku.dk/​ku2223/​uk/​module.htm
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E22; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn”
Press: “ View Timetable”

Please be aware:
- The study administration allocates the students to the exercise classes according to the principles stated in the KUnet.
- If too many students have wished a specific class, students will be registered randomly at another class.
- It is not possible to change class after the second registration period has expired.
- If there is not enough registered students or available teachers, the exercise classes may be jointed.
- The student is not allowed to participate in an exercise class not registered.
- The teacher of the exercise class cannot correct assignments from other students than the registered students in the exercise class except with group work across the classes.
- All exercise classes are taught in English and it is expected that the students ask questions in English, so foreign students are included in the dialog.
- The schedule of the lectures and the exercise classes can change without the participants´ acceptance. If this occur, you can see the new schedule in your personal timetable at KUnet, in the app myUCPH and through the links in the right side of this course description and the link above.
- It is the students´s own responsibility continuously throughout the study to stay informed about their study, their teaching, their schedule, their exams etc. through the curriculum of the study programme, the study pages at KUnet, student messages, the course description, the Digital Exam portal, Absalon, the personal schema at KUnet and myUCPH app etc.

Oral
Individual
Collective

 

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.

ECTS
7,5 ECTS
Type of assessment
Written examination, 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 in English.

Changes to the exam due to a pandemic crisis:
In the event that restrictions from a pandemic crisis may affect the conduction of the ITX-exams, the written exam and the re-sit exam will change to a take-home exam. The changes will be announced in study messages at KUnet and in Digital Exam.

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 occur, it will be regarded as cheating and plagiarism.
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Aid

No aids allowed at the written ITX-exam.

 

If the ITX-exam changes to a take-home exam due to a pandemic crisis, the written take-home exam is with all aids.

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

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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
- Go to 'Signup' for information about registration and enrollment.
Price

Information about admission and tuition fee:  Master and Exchange Programme, credit students and guest students (Open University)

Schedulegroup
and venue:
- For teaching: Go to 'Remarks'.
- For exam and re-sits: Go to 'Exam'.
Studyboard
Department of Economics, Study Council
Contracting department
  • Department of Economics
Contracting faculty
  • Faculty of Social Sciences
Course Coordinator
  • Stefan Voigt   (12-7778696a6572327a736d6b784469677372326f7932686f)
Teacher

See 'Course Coordinators'

Teachers of exercise classes:
Exercise class 1:
Exercise class 2:
Exercise class 3:
Exercise class 4:
Exercise class 5:
Exercise class 6:

Please read "Remarks" regarding the schedule of the teaching.

Saved on the 27-04-2022

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Courseinformation of students