1.

Class Title

Financial Economics

credit value

12

standard / level

Masters (Diploma stage of Masters Programme)

core / optional

optional

semester

Semester 2 (except when taken by Open Learning)

pre-requisites

session

2005-06

2.

Contact details

Lecturer in Charge

Mr Jim Stevens

telephone number

0141 548 3960

e-mail address

j.stevens@strath.ac.uk

Administrator

Joyce Russell

telephone number

0141 548 3865

e-mail address

j.m.russell@strath.ac.uk

3.

Overview

Overview

4.

Syllabus

The programme is given in the accompanying table.

5.

Class Materials

Reading

Given that nature of this course, covering as it does various aspects of the pricing of financial assets, there is no single textbook. The recommended texts are:

• Richard Clayton et al (1980) The Term Structure of Interest Rates, Blackwell
• Paul Hallwood and Ronald MacDonald (2000) International Money and Finance, Blackwell, Third Edition
• John Hull (1992) Futures and Options Pricing, Prentice-Hall
• Robert Shiller (1992) Stock Market Volatility, MIT Press.

6.

Assessment Structure

General

The overall mark for this class is based on two components: an assessed essay and a final examination, each accounting for 50% of the total mark.

Assessed essay

An assignment will take the form of a 2,500 word essay, to be submitted by the beginning of April.

Examination

A two-hour written examination will be held in May. The exam is largely essay based, although a number of optional numerical questions may be included.

7.

Learning Outcomes

Knowledge and understanding

• To know a range of fundamentals-based models of the exchange rate, including purchasing power parity and the monetary model, and how these models may be used for forecasting purposes.
  
  
• An understanding of technical analysis and how it may be used to forecast currency movements.
  
  
• To understand the various models which attempt to explain the yield gap.
  
  
• An understanding of the efficient markets hypothesis and its relationship to the noise trader model.
  
  
• To know how options are priced and the kind of trading strategies involving options that can be developed to hedge price movements in the underlying asset.
  
  
• To understand Option Trading Strategies.
  
  
• To understand the present value model of asset prices.

Practical Professional Skills

The pricing valuation models used for the different assets considered in this course – exchange rates, stock prices, bond prices and options – are all used by practitioners in the financial sector. Indeed someone who becomes employed in the financial sector, or a financial related company, will find the skills acquired in this course are state-of-the-art. 

8.

Elements of Teaching

Two complementary, conventional means of delivery are used:

First, the lectures will cover the basic framework for each of the topics. The lectures will cover both theoretical and empirical aspects of the topics.

Second, your independent reading for this module will further reinforce and expand your knowledge of the topics.

9.

Teaching Staff

Jim Stevens

10.

Additional Information

None

11.

Complaints Procedure, Equal Opportunities and Disability Service

Information on the University’s Complaints Procedure, Policy on Equal Opportunities and Provision for Students with Special Needs is contained in the MSc EMP Handbook 2005-06. This information is also available on the Faculty’s Undergraduate Student Handbook and on the University’s web pages: http://www.strath.ac.uk

Students’ with Special Needs should see the Module Administrator, Joyce Russell, as soon as possible.  Students who believe they may need additional support or equipment, but have not spoken to anyone in the University about it yet should also contact the University’s Disability Service, Level 4, Graham Hills Building, tel: 0141 548 3402, web: http://www.mis.strath.ac.uk/SSS