Financial Economics

Bachelor 2021/2022

Type: Elective course (Economics)

Area of studies: Economics

Delivered by: School of Finance

Where: Faculty of Economic Sciences

When: 4 year, 1, 2 module

Mode of studies: offline

Open to: students of one campus

Instructors: Victoria V. Dobrynskaya, Mariia Evdokimova, Pavel Malyshev, Nikita Pirogov, Irina Yuryevna Verem

Language: English

ECTS credits: 5

Contact hours: 64

Full Syllabus

Abstract

This is an introductory course in Finance which covers the basic principles of financial markets and asset pricing. We will discuss different financial instruments and how to use them for investment or hedging purposes. We will proceed to the basics of asset valuation. The starting point will be the present value formula. We will then talk about fixed-income securities, their valuation and the term structure of interest rates. The course will then move to stocks, starting with portfolio theory and then deriving the relation between risk and return. We will study the main asset-pricing models: the CAPM and the APT. We will talk about empirical multifactor models and various risk factors. We will discuss the major asset-pricing anomalies and investment strategies which exploit them. Finally, we will turn to derivatives, their replication and valuation based on no-arbitrage principle, and the use of them for hedging purposes. The course consists of lectures and classes. Each lecture is followed by a class where students solve numeric problems. There are short quizzes in classes and an optional research task. You must write a quiz in the class to which you are assigned. Attendance of other classes is only permitted in exceptional circumstances, and the class-teachers must be notified in advance. There is a written mid-term test in the middle of the course and a written final test at the end of the course. There is no make-up for the mid-term test and quizzes. If a student misses a quiz or a written test due to illness (with an evidence), the final grade is determined as follows: Final grade = Cumulative grade/(1-ωi), where ωi is the weight of test i. If a student misses a quiz or the mid-term test without supplying an evidence of illness (or another valid reason), the student gets zero for this form of control without any adjustment of the final grade. Final grades (in %) will be normalized to the top grade (i.e. divided by the highest grade in the cohort and multiplied by 100%) in case the top grade is below 100%. If the top grade is above 100%, all grades are not normalized. The final grade is calculated in percent, divided by 10 and rounded according to mathematical rules. If a student’s final grade is below the pass bar (35%), or if the student misses the final test, the re-take procedure follows the HSE rules. If a student misses the final test due to illness, there is a second attempt during the retake period. The course requires a sufficient amount of self-study and reading textbooks.

Learning Objectives

Familiarize students with various financial instruments, financial markets and basic principles of asset pricing and risk management.
Students will be familiar with financial terminology in English and Russian.
Students will know how to form and diversify portfolios of assets, how to find expected returns and risks of assets and portfolios of assets.
Students will be able to find fair prices of financial assets and make investment decisions.
Students will know the notion of risk premium and models characterizing equilibrium risk premiums.
They will also be familiar with the most popular asset-pricing anomalies and the basics of behavioral pricing.

Expected Learning Outcomes

be able to find fair prices of financial assets and make investment decisions
Be able to use different financial instruments for investment or hedging purposes
be familiar with the most popular asset-pricing anomalies and the basics of behavioral pricing
know how to find expected returns and risks of assets and portfolios of assets
know how to form and diversify portfolios of assets
know the notion of risk premium and models characterizing equilibrium risk premiums

Course Contents

Financial markets and instruments
Discounting
Bond market
Stock market
Portfolio theory and diversification
Asset pricing models: the CAPM
Asset pricing models: the APT
Empirical multifactor models
Options and option pricing
Types of information in financial markets
Asset-pricing anomalies
Arbitrage strategies

Assessment Elements

quizzes (15%)
Optional research task (6%)
mid-term test (25%)
There is no re-take for the mid-term test and quizzes. If a student misses a quiz or the mid-term test due to illness, the final grade is determined as follows: Final grade = Cumulative grade/(1-ωi), where ωi is the weight of test i.
final test (60%)
If a student misses the final test due to an illness, it must be written during the re-take period, and the final grade will be determined according to the general formula. If a student misses the final test without a valid reason and support documents, zero grade is assigned for the test. If a student’s final grade is below the pass bar, the re-take procedure follows the HSE rules.

Interim Assessment

2021/2022 2nd module
0.25 * mid-term test (25%) + 0.15 * quizzes (15%) + 0.6 * final test (60%)

Bibliography

Recommended Core Bibliography

Alec N. Kercheval. (2012). Financial Economics: A Concise Introduction to Classical and Behavioral Finance, by T. Hens and M. O. Rieger. Quantitative Finance, (10), 1487. https://doi.org/10.1080/14697688.2012.695085
Cuthbertson, K., & Nitzsche, D. (2004). Quantitative Financial Economics : Stocks, Bonds and Foreign Exchange (Vol. 2nd ed). Chichester, England: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=130854
Rita Biswas, & Michael Michaelides. (2019). Essays in Financial Economics. Bingley: Emerald Publishing Limited. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=2181120

Recommended Additional Bibliography

Hens, T. Financial Economics: A Concise Introduction to Classical and Behavioral Finance / Thorsten Hens, Marc Oliver Rieger. – 2nd ed. – Berlin: Springer-Verlag, 2016. – (Springer Texts in Business and Economics). - Текст: электронный // DB Springer Books [сайт]. – URL: https://link.springer.com/book/10.1007/978-3-662-49688-6

Course Syllabus