Checking date: 24/04/2023

Course: 2023/2024

Financial Economics
(13648)
Dual Bachelor in International Estudies and Econmics (Study Plan 2018) (Plan: 417 - Estudio: 328)

Coordinating teacher: SERRANO JIMENEZ, PEDRO JOSE

Type: Compulsory
ECTS Credits: 6.0 ECTS

Course:
Semester:

Requirements (Subjects that are assumed to be known)
- Mathematics for Economics I - Mathematics for Economics II
Objectives
At the end of the course students should be able to: - Compute present and future values of cash-flow streams to compute the net present values of different real and financial investments. - Have a basic knowledge of the functioning of financial markets and of the way in which investment decisions are made. - Understand the risk-return tradeoff. Understand how diversification affects risk. - Have a clear understanding of the difference between systematic and diversifiable risk and know how to measure each. - Understand how interest rates are set and the principles of valuation of fixed income securities. - Know the basic types of derivatives and understand why and how they are used in risk management.
Skills and learning outcomes
Description of contents: programme
Financial Economics -1. Introduction to Financial Markets a.Financing investment in the economy b.Financial markets and trading financial assets -2. Financial Mathematics a.Introduction: The time value of money b.Simple and compound interest. Equivalent interest rates. c.Present and Future Values. d.Annuities -3. Investment Appraisal a.Cash flows b.Determining current and future values c.Net present value of an investment project d.Internal rate of return e.Other valuation techniques -4. Risk and Return a.Mathematical representation of a portfolio b.Expected portfolio returns c.Variance and standard deviation d.Finding the minimum variance portfolio e.Graphical representation of expected return and standard deviation of a portfolio -5. Portfolio Theory a.Diversification Effect b.Assumptions of the Mean-Variance Analysis c.The Efficient Frontier d.The tangency portfolio -6. The Capital Asset Pricing Model (CAPM) a.Relationship between risk and expected return b.The CAPM model c.The CML and The SML d.Portfolio Beta -7. Fixed Income Securities a.Valuation of fixed income b.The term structure of Interest Rates c.Forward interest rates d.Default risk e.Risk Management -8. Derivatives Products a.Types of derivatives b.Pricing Principles Reference text books: - Bodie, Z., Kane, A. and Marcus, A. J. (2017), Investments, McGraw Hill (10th. Edition). - Brealey R., S. C. Myers and F. Allen (2016), Principles of Corporate Finance, 12th edition, McGraw Hill. Other useful books: - Marín, J.M. and G. Rubio (2011), Economía Financiera, Antoni Bosch. - Essentials of Corporate Finance, 9/e edition, Stephen Ross, Jeffrey Jaffe, and Randolph Westerfield, 2017
Learning activities and methodology
Learning activities comprise: 1.- Theory - Sessions. The instructor of the course teach the basic concepts of the topic. Classnotes are provided to the students. 2.- Solution to exercises. The student must solve the test to assess his/her degree of knowledge of the different concepts. 3.- Exercises - Sessions. The instructor of these sessions solves the exercise sets provided to the students.
Assessment System
• % end-of-term-examination 50
• % of continuous assessment (assigments, laboratory, practicals...) 50
Calendar of Continuous assessment
Basic Bibliography
• Brealey, Myers and Allen . Principles of Corporate Finance 12/e. McGraw-Hill,. 2017
• Zvi Bodie, Alex Kane, and Alan J. Marcus. Essentials of Investments, 10th Edition. McGraw-Hill Irwin. 2017