Financial Economics 2600-MSFRdz1EF
LECTURE
Basic concepts of financial economics
Equilibrium on the financial market (stock market, agent theory, consumption and selection portfolio, priority conditions, general equilibrium, existence and invariance of equilibrium, models of representative agents)
Basic models and tests on financial markets
Prediction of rates of stock prices
Linear prices and the functioning of returns, linear equilibrium, prices on regulated markets, optimization problem
Arbitrage and strong arbitrage, diagram representation, cost function, arbitrage and optimal portfolios, balance valuation
Portfolio restrictions (short selling restrictions, portfolio selection under short selling restrictions, one price right, limited and unlimited arbitration, equilibrium rate)
Volatility and equilibrium theory, prices and neutral risk, portfolio volatility and limitations
Risk and expected utility, von Neumann-Morgenstern theory, utility axioms in state control conditions, expected utility axioms
Risk aversion and risk neutrality, Arrow-Pratt measures of risk aversion, risk compensation, Pratt theory, risk aversion
Optimal portfolios (portfolio selection and wealth, optimal single-risk portfolios, risk premium and optimal portfolios, optimal portfolios when the risk premium is low)
Comparative statistics of optimal portfolios (wealth, unexpected returns, risk)
Optimal portfolios taking into account several risks (return on risk, optimal portfolios under fair valuation conditions, risk premium and optimal portfolios, optimal portfolios within line risk tolerance)
Equilibrium price and allocation (returns at equilibrium, expected returns at equilibrium, variability of marginal returns)
Competitive markets and Pareto risk allocation balance
Analysis of variance
Factor valuation (valuation errors, average structure valuation)
Long-term forward markets (imbalance on long-term financial markets, imbalance and information, asset range, first equilibrium condition, arbitration, dynamic markets, event analysis, Pareto equilibrium)
Rational bubbles and learning
Behavioral and anomalously market finances
Models of market behavior
EH testing theory
Affine and SDF models
CIP, UIP and FRU testing
Investments and bankruptcy theory
ESG as a new factor of financial risk
EXERCISES
Financial economics basic concepts
Modeling of financial markets (normality tests, random walk, cointegration, monte carlo simulation)
EMH testing
Prediction of stock prices using residual tests, ECM, non-nonlinear models, Markov models
Building balance under rope prices
Arbitrage and valuation
Modeling under portfolio constraints
Risk modeling when making investment decisions
Risk aversion
Optimal portfolios
Comparative statistics of optimal portfolios
Optimal portfolios taking into account several risks
Balance price and allocation
Competitive markets and Pareto risk allocation balance
Analysis of variance
Factor valuation
Long-term forward markets
Rational bubbles and learning
Models of market behavior
EH testing theory
Affine and SDF models
CIP, UIP and FRU testing
Modeling bankruptcy risk
Type of course
Mode
Course coordinators
Learning outcomes
After completing the course (lecture and classes), the student:
- knows and understands:
• K_W01 - in-depth research methodology and terminology in the field of management and quality science discipline and in complementary disciplines (economics and finance), in particular in the area of financial management and accounting;
• K_W02 - in-depth principles, procedures and practices regarding financial management in organizations, accounting, management of financial institutions and strategies of financial institutions;
• K_W03 - in-depth theories and economic models regarding the functioning of organizations in the entire economy;
• K_W05 - complex processes and technological, social, political, legal, economic processes and their impact on financial decisions in organizations, the functioning of the organization and the entire economy;
- can:
• K_U01 - use the theories of the discipline of management and quality science and complementary sciences (economics and finance) to recognize, diagnose and solve problems related to financial decisions in the organization and management of financial institutions, using appropriate selection of sources and adapting existing or developing new methods;
• K_U02 - correctly interpret assumed economic processes and their impact on financial decisions in organizations, the functioning of the organization and the entire economy, using the appropriate selection of sources;
- is ready to:
• K_K01 - assessment of a critical approach to complex situations and phenomena related to financial management in organizations, accounting, management of financial institutions and strategies of financial institutions;
• K_K03 - to comply with and develop ethical standards.
Assessment criteria
Lecture: Written exam (test, open questions, tasks)
Exercises: ongoing assessment (current preparation for classes and activity), mid-semester written tests, attendance control, semester work. The necessary condition to pass the exercises is to submit the project.
Learning outcomes will be verified on an ongoing basis by means of tasks performed by participants during the exercises and finally by passing the exercises (test) and the exam.
Lecture:
• written exam (100% mark)
• very good grade in exercises (20% of the grade)
• additional points for activity 10%
Exercises:
• 10% work in classes,
• 70% group project;
• 20% final test
Bibliography
Patrycja Chodnicka-Jaworska, Piotr Jaworski, Wrażliwość rynku akcji na publikacje danych rynkowych w czasie pandemii COVID-19, Wydawnictwo Naukowe Wydziału Zarządzania UW, 2020;
Patrycja Chodnicka-Jaworska, Credit rating na rynku finansowym, PWE, 2019;
Krzysztof Jajuga, Teresa Jajuga, Inwestycje, PWN, 2015;
Stephen F. LeRoy, Jan Werner, Principles of Financial Economics, Cambridge University Press 2 edition, 2014;
Keith Cuthbertson, Dirk Nitzsche, Quantitative Financial Economics: Stocks, Bonds and Foreign Exchange, 2nd Edition, Wiley, 2004.
Additional information
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: