THEORY OF FINANCE - 2018/9

Module code: ECOM033

Module Overview

This module provides an in-depth review of the building blocks of modern finance theory and introduces the workings of financial markets at the graduate level. The analysis begins by establishing the characteristics of a rational, risk-averse and utility-maximising investor. The ensuing discussion of the concept of risk leads to the introduction of portfolio theory and asset pricing models. Market efficiency is discussed next and, finally, the module encompasses the pricing of derivative securities such as stock options and the determination of the exchange rate in the foreign exchange market.

Module provider

Economics

Module Leader

MANDILARAS A Dr (Economics)

Number of Credits: 15

ECTS Credits: 7.5

Framework: FHEQ Level 7

JACs code: N300

Module cap (Maximum number of students): N/A

Module Availability

Semester 2

Prerequisites / Co-requisites

None

Module content

Indicative content includes:


Decision making under uncertainty
Risk aversion and the risk premium
Portfolio theory and two-fund separation
Different types of the capital asset pricing model (CAPM)
Arbitrage pricing theory
The efficient market hypothesis
Stock options and the Black-Scholes model
'Greek parameters’ for stock options
Foreign exchange market and exchange rate determination

Assessment pattern

Assessment type Unit of assessment Weighting
School-timetabled exam/test IN-SEMESTER TEST - 90 MINUTE MULTIPLE CHOICE AND OPEN ENDED QUESTIONS 25
Examination EXAMINATION - 2 HOURS; MULTI-PART, OPEN-ENDED QUESTIONS 75

Alternative Assessment

Same as original assessment.

Assessment Strategy

The assessment strategy is designed to provide students with the opportunity to demonstrate that they have achieved the module’s learning outcomes.

Thus, the summative assessment for this module consists of:


An in-semester test and a final examination.
The in-semester test (25% of the final module mark) lasts for 90 minutes and is a mix of multiple-choice and open-ended questions. Normally, it is held in Week 7 and usually covers material covered up to week 5.
The final two-hour examination (75% of final mark) consists of four multi-part questions, two of which should be answered. It is designed to reflect the learning outcomes. This is scheduled in weeks 13-14.


Formative assessment and feedback

Students are supported in their preparation for the summative assessments and receive various forms of feedback. On the former, they are provided with the solutions to the last three years’ in-semester tests and the last three years’ final examination papers. On the latter, feedback is made available through SurreyLearn once coursework marks are released, normally within two weeks. This includes comments on student performance and advice on how to improve, where appropriate. Finally, students are invited to visit the lecturer during dedicated ‘feedback slots’ and discuss their learning on a one-to-one basis.  

Module aims

  • Equip the students with the factual, conceptual and procedural knowledge necessary to facilitate a deep understanding of the theoretical models that help explain financial investment behaviour.

Learning outcomes

Attributes Developed
001 Demonstrate a systematic understanding of how the assumptions about investment behaviour and risk underpin finance theory KC
002 Critically evaluate different capital asset pricing approaches KPT
003 Analyse the determinants of prices in option and currency markets KCPT
004 Apply their knowledge in the pricing of a range of financial securities KCPT
005 Display a comprehensive understanding of the arguments relating to capital market efficiency K
006 Solve problems under time constraints PT

Attributes Developed

C - Cognitive/analytical

K - Subject knowledge

T - Transferable skills

P - Professional/Practical skills

Overall student workload

Methods of Teaching / Learning

The learning and teaching strategy is designed to satisfy the module’s learning outcomes.

The learning and teaching methods include:


2-hour lecture per week × 11 weeks
Lecturer-Student interaction through the University’s VLE (SurreyLearn)
Q&As facilitated by electronic voting (PollEverywhere)

Indicated Lecture Hours (which may also include seminars, tutorials, workshops and other contact time) are approximate and may include in-class tests where one or more of these are an assessment on the module. In-class tests are scheduled/organised separately to taught content and will be published on to student personal timetables, where they apply to taken modules, as soon as they are finalised by central administration. This will usually be after the initial publication of the teaching timetable for the relevant semester.

Reading list

Reading list for THEORY OF FINANCE : http://aspire.surrey.ac.uk/modules/ecom033

Programmes this module appears in

Programme Semester Classification Qualifying conditions
Economics MSc 2 Optional A weighted aggregate mark of 50% is required to pass the module
International Economics, Finance and Development MSc 2 Compulsory A weighted aggregate mark of 50% is required to pass the module
Business Economics and Finance MSc 2 Compulsory A weighted aggregate mark of 50% is required to pass the module
Economics and Finance MSc 2 Optional A weighted aggregate mark of 50% is required to pass the module

Please note that the information detailed within this record is accurate at the time of publishing and may be subject to change. This record contains information for the most up to date version of the programme / module for the 2018/9 academic year.