Master
2023/2024
Topical Issues in Financial Economics
Type:
Compulsory course (Financial Markets and Institutions)
Area of studies:
Finance and Credit
Delivered by:
School of Finance
Where:
Faculty of Economic Sciences
When:
1 year, 3 module
Mode of studies:
offline
Open to:
students of all HSE University campuses
Instructors:
Maria Shchepeleva
Master’s programme:
Financial Markets and Financial Institutions
Language:
English
ECTS credits:
3
Contact hours:
40
Course Syllabus
Abstract
This course introduces fundamental ideas in the theory of finance. It consists of three parts, including microeconomic foundations of finance, corporate finance and asset pricing. The first section covers a number of topics, ranging from individual decision making under certainty and uncertainty to market equilibrium and the impact of information asymmetry on exchange outcomes. The second section revises some fundamental ideas from capital structure management such as Modigliani-Miller theorem, the concept of WACC, the role of taxes and dividend policy in creating company’s value. The third section studies conventional models of asset pricing, e.g. the capital asset pricing model (CAPM) and its extensions, the arbitrage pricing theory (APT) and martingale pricing methods.
Learning Objectives
- This course is intended to give students a comprehensive understanding of the fundamental theoretical concepts in finance and describe various techniques for appropriate pricing of financial instruments.
Expected Learning Outcomes
- describe the main functions of the financial sector
- know the main principles of finance
- get acquainted with the main issues in finance: stochastic discount factor, risk-neutral valuation, (in)complete markets, asymmetric information, equilibrium and arbitrage pricing
- know the factors, which determine the investors' choice under certainty and uncertainty
- know how to calculate coefficients of risk-aversion
- understand and discuss the logic of capital structure decisions
- understand corporate payout decisions
- know the assumptions, application and limitations of the modern portfolio theory
- describe the assumptions, apply and criticize CAPM
- understand the principles of Arrow-Debreu pricing and martingale pricing
- describe, apply and criticize single and multiple factor asset pricing models
- get acquainted with the Efficient Market Hypothesis and models of financial equilibrium with differential information
Course Contents
- The role of financial markets in macroeconomics.
- Introduction to the Theory of Finance: evolution of the discipline and the main principles of finance.
- What determines the demand for financial assets? Making choices in risky situations. Risk aversion and investment decisions.
- Corporate financial decision making. Part 1.
- Corporate financial decision making. Part 2.
- Modern Portfolio Theory.
- The Capital Asset Pricing Model.
- Arrow-Debreu Pricing. The Consumption Capital Asset Pricing Model.
- Arbitrage Pricing. The Martingale Measure. The Arbitrage Pricing Theory.
- Efficient Market Hypothesis. Financial equilibrium with differential information.
Interim Assessment
- 2023/2024 3rd module0.3 * Class activity + 0.2 * In-class presentation + 0.25 * Midterm 1 + 0.25 * Midterm 2
Bibliography
Recommended Core Bibliography
- Advances in financial economics, , 2012
- Asset pricing, Cochrane, J. H., 2005
- Berk, J. B., & DeMarzo, P. M. (2017). Corporate Finance: The Core, Global Edition: Vol. Fourth edition. Pearson.
- Brealey, R. A., & Allen, F. (2015). Principles of corporate finance. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.BEEE7487
- Cochrane, J. H. (2005). Asset Pricing (Vol. Rev. ed). Princeton, N.J.: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=329716
- Corporate finance, Berk, J., 2011
- Corporate finance, Brealey, R. A., 2006
- Corporate finance, Brealey, R.A., 2006
- Pesaran, M. H. (2010). Predictability of asset returns and the efficient market hypothesis. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.69756440
- Ray Ball. (2009). The Global Financial Crisis and the Efficient Market Hypothesis: What Have We Learned? Journal of Applied Corporate Finance, (4), 8. https://doi.org/10.1111/j.1745-6622.2009.00246.x
Recommended Additional Bibliography
- Теория финансов : материалы для чтения : [по книге Martin J.D., Cox S.H., MacMinn R.D. The theory of finance], Martin J.D., 2008