Foundations of Finance Theory (P02876)

? Credit Points : 20 ? SCQF Level : 11 ? Acronym : SBE-P-FFT

The focus of this course is on the financial theory and empirical evidence that are useful for investment decisions. The topics covered in this course can be broadly categorized into three groups:

Financial Theories
This includes portfolio theory, the capital asset pricing model and the arbitrage pricing theory, all of which have become an integrated part of the decision-making in investments.

Empirical Evidence in the Equity and Equity Options Markets
This includes patterns in cross-sections of stock returns, the time-series behavior of stock returns time-varying expected returns, and further empirical evidence from the equity options market.

Introduction to Fixed-Income and Derivative Instruments
This includes bonds, derivatives, fixed-income derivatives such as swaps.

Entry Requirements

none

Subject Areas

Home subject area

Common Courses (School of Business and Economics), (School of Business and Economics, Schedule H)

Delivery Information

? Normal year taken : Postgraduate

? Delivery Period : Semester 1 (Blocks 1-2)

? Contact Teaching Time : 2 hour(s) per week for 10 weeks

All of the following classes

Type	Day	Start	End	Area
Lecture	Wednesday	09:00	10:50	Central

? Additional Class Information : The Lectures take place in LT4 in 7 Bristo Square

Summary of Intended Learning Outcomes

On completing the module, students should:

Understand the concepts of risk and return
Be able to construct portfolios that are efficient in the sense that they maximise expected return for a given level of risk, or minimise risk for a given expected return.
Have a detailed knowledge of asset pricing models.
Understand the principles of market efficiency; be aware of the empirical evidence on market efficiency.
Be able to critically understand option-pricing models and be able to make extensions to the basic models.

This module will develop in students the ability to:

Rigorously analyse quantitative problems in finance.
Interpret financial data in the light of established theories.
Familiarise themselves with the most recent empirical research and be able to critically appraise it.

This module will develop in students the ability to

Analyse and evaluate quantitative problems;
Implement solutions to these problems using a spreadsheet;
Work independently and as part of a group.