Financial Economics
时间：2015年07月15日 03:13, 发布人：系统管理员
Course Description: This course is about foundation of finance, financial markets: financial assets (securities) and how they are valued and traded. Financial markets constitute the financial environment in which the firm operates. For the most part, we take the viewpoint of a user of the financial market: an investor, investment advisor, or someone using the market to hedge (reduce) risk.
Prerequisites: The prerequisites for this course are introductory courses in accounting, statistics and economics. Finance is very mathematical and you will need to utilize material developed in the prerequisite courses. If you have not taken these courses, you may have great difficulty in this one.
Requirements: There will be problem sets (to be handed in) as assignments. There will be an inclass midterm and a final exam.
Grading: The final grade in the course will be 35% Midterm, 40% Final, 10% homework and 15% on the class performance in experimental teaching sessions and video discussions. TA will record the performance of students each week.
Textbooks and supplementary materials:
Textbooks ( available on Amzon.cn)
 Bodie, Merton and Cleeton(BMC), Financial Ecomonics, 2nd edition. (required)
 Bodie, Kane and Marcus (BKM), Investments, 8th edition.
Course Schedule: (Tentatively)
Week #

Lecture topics

Experimental Content

Week 1

Introduction to Finance and financial system, Chapter 1&2.

Video: The commitment under the plane tree.

Week 2

Financial Statement Analysis, Chapter 3


Week 3

Time Value of Money and DCF analysis, Chapter 4.

Experiment: Simulations using Financial Models Dynamic System.

Week 4

Household Financial Decisions, Chapter 5.


Week 5

Project Evaluation and principles of market valuations, Chapter 6&7.

Video: asset price boom and bust

Week 6

Valuations Assets: Bonds, Chapter 8.

Video: The issuance of Treasure Bills

Week 7

Midterm


Week 8

Valuations assets: Stocks, Chapter 9.

Video: The power of stocks

Week 9

Hedging, Insuring, and Diversifying, Chapter 10&11

Video: The valuation of risk
Experiment: Being Warren Buffett

Week 10

Portfolio Theory and Management, Chapter 12


Week 11

Asset Pricing Models, Chapter 13

Experiment: Limit Order Asset Market

Week 12

Derivative Analysis, Chapter 14

Experiment: American Call Option

Week 13

Options and real options, Chapter 15&17


Week 14

Final


Appendix: Description for each experiment
Session I: Simulations using Financial Models Dynamic System.
Students Conduct Simulations using Financial Models Dynamic System. The Purpose of the experiment is to help students understand how to apply formulas or financial models in the textbook with environment simulations. The platform for the experiment is the FMD system in GTA software platform of Financial Lab.
Session II: Being Warren Buffett
This is a classroom simulation of Risk and Wealth. Stock market investors find out that a single fund with a high mean return is a risky investment if it also has a high variance; paradoxically, a diversified portfolio containing this fund is a good investment.
Students play individually and have a choice of 3 funds in which to invest money. The first fund mimics the long term behavior of the stock market and exhibits steady growth with occasional downturns. The second fund has by far the highest mean gross return, trebling in value half of the time, but it also has the highest variance and is a risky investment. The third fund mimics the inflationadjusted behavior of treasury bonds and stays virtually constant. The game consists of a number of repeated rounds and the growth in each fund during a given round is determined by making a random selection from among 6 possible outcomes. In the basic game, students must invest 100% in one of the 3 funds, although they may switch funds between rounds. Alternatively, the instructor may allow investments to be split across more than one fund.
Intended Learning Outcomes: 1) Variance as a measure of the risk of an investment; volatility drag. 2)Role of a diversified portfolio in reducing risk.
Session III: Limit Order Asset Market
This session sets up an asset market in which traders are given endowments of cash and asset "shares" with random dividends. Cash may be kept in a safe account with a fixed interest rate. Finalperiod redemption values may either be known or random. With random redemption values, private information signals about the unknown common redemption value may be given to "insiders." Traders submit buy or sell limit orders that are ranked and "crossed" to determine a uniform marketclearing price. The instructor may press a Stop Trading button to "call" the market if some traders are inactive. The interest rate for cash induces a time preference and that determines the fundamental (present) value of a share. Trading prices can be compared with the fundamental values to identify bubbles or crashes driven by expectations.
Session IV: American Call Option
The owner of an American call option watches the stock price rise as the expiry date approaches and decides when to exercise or sell the option. Repeat play gives students an understanding of the fair market price for the option and shows that there is no benefit in exercising early.
Students play multiple rounds individually against the computer. The student is an investor in the stock market who has bought an American call option on a stock. The stock price starts at £2.00 and increases in 10 random increments of either 2.5% or 7.5%; the call option has a strike price of £2.50. The student watches as the increments are applied and can at any point decide to exercise the option or sell it on the open market. Any profits made in this way increase at a riskfree interest rate of 5% as each remaining increment is applied.
There are two versions of the game. In the first, the student is told the fair market price for selling the option as each increment is applied to the stock price. In the second, the student only learns what the price is after they have made the decision to sell but they are invited to guess beforehand what a fair price might be.
Intended Learning Outcomes: 1) Exercising early does worse than waiting; not worth paying a premium over and above a European call option that can only be exercised on its expiry date. 2) Discussion of how to calculate the fair market price for selling the option.