Financial Economics 2600-DIz1EF
LECTURE
During the course, students will become familiar with the following topics:
Financial economics – basic concepts
Equilibrium in the financial market (securities market, agency theory, consumption and portfolio choice, priority conditions, general equilibrium, existence and stability of equilibrium, representative agent models)
Basic models and tests on financial markets
Prediction of stock returns
Linear pricing and the functioning of returns, linear equilibrium, prices on regulated markets, optimization problem, arbitrage and strong arbitrage, optimal portfolios, equilibrium valuation, portfolio constraints (short-selling restrictions, portfolio choice under short-selling constraints, law of one price, limited and unlimited arbitrage, equilibrium pricing)
Volatility and equilibrium theory, pricing and risk neutrality, volatility and portfolio constraints, risk and expected utility, Von Neumann–Morgenstern utility theory
Utility axioms under government regulation, axioms of expected utility
Risk aversion vs. risk neutrality, Arrow–Pratt measures of risk aversion, behavioral finance and market anomalies, models of market behavior
During the lectures, students will apply models in practice to identify trends and, with the instructor’s guidance, participate in research on financial markets, particularly in equities, bonds, and other instruments. Issues related to sustainable development and green financial instruments are also addressed.
CLASSES
Financial economics – basic concepts
Financial market modeling (normality tests, random walk, cointegration, Monte Carlo simulation)
Testing the Efficient Market Hypothesis (EMH)
Building equilibrium under linear pricing conditions
Risk modeling in investment decision-making
Optimal portfolios under multiple risk factors
Equilibrium price and allocation
Analysis of variance
Factor valuation
Long-term derivative markets
Models of market behavior
Probability modeling
EH testing theory
Bankruptcy risk modeling
Type of course
Learning outcomes
After completing the course, the student will be able to:
in terms of knowledge:
• demonstrate in-depth knowledge of research methodology and terminology in the discipline of economics and finance as well as in complementary disciplines (management and quality sciences, legal sciences), including such concepts as agency theory, consumption and portfolio choice, the existence of equilibrium, the relationship between risk and expected utility based on the Von Neumann–Morgenstern theory, and Arrow–Pratt measures of risk aversion (K_W01)
• demonstrate in-depth knowledge of the principles, procedures, and practices related to investment advisory and capital markets, including the practical application of equilibrium principles in financial markets, arbitrage theories, portfolio optimization, and volatility in financial management within organizations and in the strategies of financial institutions, as well as characterize basic models and tests of financial market functioning (K_W02)
• understand complex technological, social, political, legal, economic, and ecological processes and phenomena, including fundamental dilemmas of modern civilization and their impact on financial decisions in organizations, the functioning of the entire economy, and organizations in the field of information systems development (K_W05)
in terms of skills:
• apply theoretical knowledge of economics and finance, as well as complementary disciplines (management and quality sciences, legal sciences), to identify, diagnose, and solve problems related to financial decision-making in the area of investment advisory and capital markets (K_U01)
• correctly interpret complex technological, social, political, legal, economic, and ecological processes and phenomena and assess their impact on financial decisions in organizations, the functioning of organizations, and the economy as a whole (K_U02)
• appropriately select sources and adapt existing or develop new methods and tools, including advanced ICT techniques, to identify, diagnose, and solve problems related to financial decision-making in the field of investment advisory and capital markets (K_U03)
in terms of social competences:
• apply critical evaluation and adopt a reflective approach to complex situations and phenomena related to investment advisory and capital markets within organizations, including assessing the implications of the Efficient Market Hypothesis (EMH) for investors using appropriate statistical tools, as well as applying variance analysis in portfolio valuation and risk models (K_K01)
Assessment criteria
Lecture: Written exam (test, open-ended questions, problem-solving tasks), class participation, additional assignments, attendance monitoring.
Classes: Continuous assessment (regular preparation and active participation), midterm written tests, attendance monitoring, semester project. Submission of the project is a mandatory condition for passing the classes.
Learning outcomes will be continuously assessed through tasks completed by students during classes and, at the end, during the class test and final exam.
Lecture:
• written exam (100% of the grade)
• excellent performance in classes (20% of the grade)
• additional points for active participation (10%)
Classes:
• 10% class participation
• 70% group project
• 20% final test
Course Completion (Exam):
• Written Exam – on-site (100% of the grade) – including open-ended, tabular, and multiple-choice questions. Only students who have passed the classes are eligible to take the exam. The minimum score required to pass the exam is 51%.
During the exam, a total of 30 points can be earned, which will determine the final grade:
• 0–50% of points – grade 2
• 51–60% of points – grade 3
• 61–70% of points – grade 3.5
• 71–80% of points – grade 4
• 81–90% of points – grade 4.5
• 91–100% of points – grade 5
Course Completion (Classes):
• 10% – in-class participation / assignments
• 70% – group project
• 20% – final quiz
A total of 100 points can be earned in classes, which will determine the final grade:
• 0–50 points – grade 2
• 51–60 points – grade 3
• 61–70 points – grade 3.5
• 71–80 points – grade 4
• 81–90 points – grade 4.5
Practical placement
Professional internships are not required for the completion of this course.
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: