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TERM 1 TERM 2 TERM 3
INDUCTION WEEK
EXAM PERIOD
Week 1
EXAM PERIOD
Weeks 1 - 3
ASSET PRICING EMPIRICAL FINANCE DISSERTATION
FOUNDATIONS OF CORPORATE
FINANCE
ELECTIVE
ECONOMICS OF FINANCIAL
MARKETS
ELECTIVE
QUANTITATIVE METHODS FOR
FINANCE
ELECTIVE
CORE MODULES – Term 1
Asset Pricing
Gain an introduction to financial markets and techniques for valuation of risky assets. The skills acquired will be used
in other modules and are essential for a financial economist.
Topics covered include:
Financial markets and instruments; choice under uncertainty and risk measurement; state preference theory; meanvariance
portfolio theory; equilibrium in capital markets; testing CAPM and APT; CAPM variants; APT and
Consumption CAPM; efficient capital markets; introduction to derivatives; portfolio performance evaluation.
Assessment consists of a series of online tests during Term 1 worth 20% of the final mark and a two-hour
examination in Term 2 (January) equivalent to 80%.

Foundations of Corporate Finance
Undertake in-depth analysis of the key determinants of the investment and financing decisions of the firm.
Topics covered include:
Capital budgeting; capital structure; dividend policy; mergers and takeovers.
Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark, and a two-hour
examination in the first week of Term 2 (January) equivalent to 80%.
Economics of Financial Markets
Learn the basic tools of economic analysis, and gain an understanding of policy issues relevant to financial markets
and the economic context within which they operate. Study the basic tools of microeconomic analysis and modern
macroeconomic theory.
Topics covered include:
Consumption and production theory and general equilibrium; strategic interaction; asymmetric <strong>information</strong> and
agency problems; The ISLM model; monetary and fiscal policy; credibility and the role of expectations; The Yield
Curve and the stock market; Dynamic ISLM.
Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark and a two-hour examination
in the first week of Term 2 (January) equivalent to 80%.
Quantitative Methods for Finance
Explore the basic tools for quantitative analysis of the financial markets and learn the quantitative skills you will
need for other modules such as, for instance, Asset Pricing and most importantly, Empirical Finance. The first two
lectures of the module are an introduction to statistics. The remaining lectures cover the material corresponding to a
sound introduction to econometrics.
Topics covered include:
Statistics: sampling, sampling distributions, point estimation, confidence intervals, hypothesis testing; linear
regression model, estimation and inference; departures from the classical linear model assumptions:
multicollinearity, heteroscedasticity, autocorrelation; model specification and diagnostic testing; introduction to time
series econometrics. ARMA models; trends and cointegration analysis.
Assessment consists of a module test in Week 11 of Term 1 worth 20% of the final mark and a two-hour examination
in the first week of Term 2 (January) equivalent to 80%.
CORE MODULE – Term 2
Empirical Finance
Gain an understanding of the theory and practice of financial econometrics with lectures covering theory as well as
empirical applications. Your practical skills will be further developed in computer-lab based seminars.
Topics covered include:
Introduction to the statistical framework for empirical modelling of financial time series; stationary processes; of nonstationary
processes; non-linear models, including models of time varying risk, with applications in risk management.
Applications will include the empirical testing of asset pricing models such as CAPM, portfolio allocation, forecasting,
yield curve modelling and nonlinear adjustment in foreign exchange markets; Efficient Market Hypothesis (EMH).
Assessment consists of two module tests worth 20% each, one group project worth 20%, and a one-hour exam in
Term 3 (April/May) worth 40%.
ELECTIVE MODULES Term 2
You will choose three elective modules from the modules listed below. This is an indicative list only; further
<strong>information</strong> and confirmation of the available electives is provided at the end of Term 1.

Advanced Corporate Finance
Explore the basic issues in mergers and acquisitions (M&As) and undertake in-depth analysis of the key determinants
of M&A activities of firms around the world. Consider the wider issues of agency problems and corporate
governance that are associated with M&A activities.
Topics covered include:
Value creation in takeovers; abnormal returns; merger waves; private equity; merger arbitrage; takeover defenses;
costs and benefits of concentrated ownership; modeling the takeover process.
Assessment consists of coursework worth 40% of the final mark and a 1 ½ hour examination in Term 3 (April/May)
equivalent to 60%.
Behavioural Finance
Psychologists working in the area of behavioural decision-making have produced much evidence against the
adequacy of neoclassical economics. Behavioural finance comprises financial analysis which relaxes some of these
assumptions. It is a paradigm where financial markets are studied using models that are less narrow than those
based on von Neumann-Morgenstern expected utility theory and arbitrage assumptions.
Topics covered include:
Market Efficiency; Prospect theory; Loss aversion; the impact of Knightian uncertainty; limits to arbitrage;
overconfidence in financial markets; herding and asset bubbles; paradoxes and anomalies; the disposition effect;
investor sentiments.
Assessment consists of a two-hour examination in Term 3 (April/May) equivalent to 70% of the final mark and
coursework worth 30%.
Derivative Securities
Explore the rich variety of derivative contracts that exist, the ways in which they may be used and the models that
can be used to determine their prices. Although the module covers both theory and application, it does not require
a particularly high level of mathematics. Much of the development for options pricing is based on binomial trees.
The module has relevance both for potential users of derivatives and for those who need to understand risk
management using derivatives.
Topics covered include:
Arbitrage and futures prices; bounds on option prices; binomial models for options; Black/Scholes model for options
and its applications; hedging with futures and options; stock-index options and portfolio insurance; interest-rate
futures and swaps; warrants and convertibles; exotic options.
Assessment consists of a module test worth 20% of the final mark and a two-hour examination in Term 3 (April/May)
equivalent to 80%.
Financial Engineering and Structured Products
Examine recent developments in financial engineering and structuring and apply your learning to real world
problems and situations. Deepen your knowledge of particular areas that are at the forefront of academic research
in derivative markets. As this is a highly quantitative module an advanced level of mathematics is required; it is
particularly suitable if you have an undergraduate degree in mathematics.
Topics covered may include:
Modelling of volatility and correlation and derivative products based upon them; the pricing of derivatives on
commodities and other non-financial underlying variables; the pricing and hedging of exotic options; study of a Ponzi
scheme; client conflicts in designing a collateralised debt obligation.
Assessment consists solely of a 3,000 word project.
Financial Reporting and Financial Statement Analysis

Consider a framework for evaluating the financial performance of a company, forecasting its future performance and
estimating its fundamental value. Consider the relative usefulness of cash flow and profit data for assessing financial
performance and the use of ratio analysis for evaluating past performance and forecasting future financial
performance.
Topics covered include:
Financial statements and their use in financial analysis; financial reporting and IFRS; reformulation of financial
statements; ratio analysis and forecasting financial performance; cash flow and accounting valuation models;
valuation theory in practice; financial statement analysis; market efficiency and earnings management; issues and
developments in financial reporting and statement analysis; corporate governance and management
communication, financial statement quality and the cost of capital.
Assessment consists of an individual project worth 80% of the final mark and a group presentation worth 20%.
Financial Risk Management
Examine financial risk management and the techniques to assess financial risks according to the regulatory
framework, having the management of risk exposure in view. Learn the quantitative methods of risk measurement
and risk management.
Topics covered include:
How to identify financial risks; coherent risk measures; models for uncertainty; numerical tools – Monte Carlo
simulation; approximations and factor reduction; Bayesian uncertainty – parameter risk; The regulatory framework
of financial risk management.
Assessment consists of a module test during Term 2 worth 20% of the final mark and a two-hour examination in
Term 3 (April/May) equivalent to 80%.
Fixed Income and Credit Risk
Explore the tools for the assessment and management of fixed income and credit risk.
Topics covered include:
Bonds and Money-Market Instruments; Bond Prices and Yields; term structure of interest rates; Martingale pricing;
continuous-time stochastic processes; affine term structure models; credit risk management; structural and intensitybased
credit risk modelling; credit derivatives.
Assessment consists of a module test and a group project each worth worth 10% of the finak mark, and a a two-hour
examination in Term 3 (April/May) worth 80%.
International Financial Markets
Consider of the theory and evidence relating to international financial markets, and in particular the foreign
exchange market.
Topics covered include:
Efficiency of the Foreign Exchange (Forex) Market; Purchasing Power Parity and the Real Exchange Rate; Exchange
Rate Determination; Forecasting Exchange Rates; Exchange Rate Models and Economic Value; Official Intervention in
the Forex Market; The Microstructure of the Forex Market; Active Management of Forex Portfolios.
Assessment consists of a module test during Term 2 worth 20%. Of the final mark and a two-hour examination in
Term 3 (April/May) equivalent to 80%.
International Financial Management
Explore corporate financial decision-making within the context of the increasing globalisation of business, exchangerate
volatility, and the internationalisation of financial markets. Extend your understanding of the theory of
corporate financial management, covered in the Foundations of Corporate Finance core module, to an international
setting.
Topics covered include:

Forward Exchange Rates; Forward Contracts for International Financial Management; Currency Futures: Markets and
Uses; Swap Markets; Currency Options; Exchange Rate Risk; International Corporate Investment.
Assessment consists of a group project during Term 2 worth 20% of the final mark, and an examination in Term 3
(April/May) equivalent to 80%.
Investment Management
Consider the theoretical and practical treatment of modern portfolio theory and portfolio management, mainly from
an equity market perspective.
Topics covered include:
Review of financial instruments and financial markets; international diversification; passive asset allocation;
performance measurement; equities; active portfolio management; bonds; forwards and futures; options.
Assessment consists of a group project worth 25% of the final mark and a two-hour examination in Term 3
(April/May) worth 75%.
Judgement and Decision Making
Gain an introduction to the psychology of human judgement and decision making. This field provides the foundation
for understanding the decision-making processes involved in financial markets. Explore how the insights from this
work can help you understand the origins of rational and irrationality in financial decision makers and financial
markets; help improve your own financial decision-making, judgements and predictions; and provide a broader
understanding of decision-making throughout the finance industry, including strategic and managerial decisionmaking.
Topics covered include:
The nature of rationality; theoretical perspective on human judgement; the psychology of value and utility; decision
making under certainty; decision making under risk; judgement; confidence and expertise; decision making in
markets, groups and society.
Assessment will be by means of a 3,000 word essay worth 80% of the final mark and a group seminar presentation
for the remaining 20%.