IB9MX-15 Foundations of Finance
Introductory description
The main aim of this module is to introduce students to Finance in general and in particular to modern theories and practices of Asset Pricing and Financial Management. The key is the modelling and measurement of uncertainty (risk), how investors make decisions in the presence of such uncertainty, and how such behaviours drive both time series and cross-section of asset prices and returns in equilibrium.
Module aims
The module is designed specifically for MSc in FinTech students and builds on their unique background profile. The main objectives are to develop 1. A general understanding of financial markets, their functions and roles; introduce and describe main financial instruments; 2. a solid understanding of the theoretical framework, 3. the ability to interpret and critically evaluate existing and new theoretical and empirical literature, and 4. the skills and methodologies to apply the theory to practical problems, such as for example to 4.a) build empirical tests to validate different models, 4.b) implement strategies for optimal asset allocation or risk management, and to 4.c) devise and implement methods to assess the performance of such strategies. As the main foundation module of the programme, this module is closely integrated with the other Term 1 core modules (for example, the Big Data Analytics module, where main statistical techniques necessary for handling financial data will be developed).
Outline syllabus
This is an indicative module outline only to give an indication of the sort of topics that may be covered. Actual sessions held may differ.
Financial Markets and Instruments
Principles of Valuation
Fixed Income Securities
Decision Making under Uncertainty, Utility Theory
Portfolio theory; risk and returns.
CAPM
General (Multi-)Factor Models, Arbitrage-Pricing Theory (APT)
Derivatives Markets, Derivative pricing
Market Efficiency Hypothesis
Learning outcomes
By the end of the module, students should be able to:
- Demonstrate an in-depth understanding of the structure and functions of financial markets as well as the roles and features of financial instruments;
- Define and explain, intuitively and formally, the fundamental trade-off between risk and return, and how this can be modelled and quantified.
- Critically explain how individuals make decisions in the presence of uncertainty, and how these affect asset prices and returns in equilibrium
- Critically evaluate empirical research
Indicative reading list
Brealey, R.A., S.C. Myers, and A.J. Marcus: "Fundamentals of Corporate Finance" (10th ed., 2020) McGraw-Hill
Berk, J.B., and P.M. DeMarzo: "Corporate Finance" (5th ed., 2019) Pearson
Danthine, J.-P. and J.B. Donaldson: "Intermediate Financial Theory" Prentice-Hall
Copeland, T., J.F. Weston, and K. Shastri: "Financial Theory and Corporate Policy", Pearson
Research element
Research element will be included during the group project, where the students have to identify the most relevant methodology to perform the task and critically review the existing literature.
Interdisciplinary
Given that the nature of the programme is inherently interdisciplinary, links to other disciplines, such as statistics, computer science will arise naturally throughout the module.
International
Finance is a global discipline, so many examples and cases will naturally involve global and international markets, e.g., concept of diversification requires to build an investment portfolio globally.
Subject specific skills
Design and implement empirical methodology to a) estimate the parameters of, and b) assess the validity of, a variety of asset pricing models;
Design and implement optimal strategies for asset allocation or risk management; devise and apply measures of performance of such strategies
Use a variety of quantitative and statistical tools to analyse data and implement/assess quantitative solutions to problems in Finance
Claims in both static and dynamic models
Transferable skills
Demonstrate academic writing skills
Study time
| Type | Required |
|---|---|
| Practical classes | 10 sessions of 2 hours (13%) |
| Online learning (scheduled sessions) | 10 sessions of 1 hour (7%) |
| Private study | 72 hours (48%) |
| Assessment | 48 hours (32%) |
| Total | 150 hours |
Private study description
38 hours preparation for workshops/ lectures; 24 hours work on assessed project; 24 hours revision in preparation for class test/exam; 34 hours self-study (reading, self-assessment, exercise)
Costs
No further costs have been identified for this module.
You do not need to pass all assessment components to pass the module.
Assessment group D
| Weighting | Study time | Eligible for self-certification | |
|---|---|---|---|
Assessment component |
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| Individual Assignment | 30% | 24 hours | Yes (extension) |
Reassessment component is the same |
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Assessment component |
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| Centrally-timetabled examination (On-campus) | 70% | 24 hours | No |
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Written Exam
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Reassessment component is the same |
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Feedback on assessment
via my.wbs
There is currently no information about the courses for which this module is core or optional.