Financial Markets and Decisions 2

Module description

Summary:

The pair of modules BEE2027)and BEE3034 present the theory of decision-making under risk and the economics of information, discussing applications of the theory in the areas of banking and finance. The topics covered include expected utility theory, adverse selection, moral hazard, Modigliani-Miller theorems and the incentive effects of debt and equity.

Internationalisation

The module content is globally relevant as it theoretically discusses financial markets, international trends in corporate finance and governance, and comparative studies through up-to-date research.

Employability
Students acquire several skills valued by employers, including a theoretical knowledge and understanding of financial markets, the application of theory, the ability to think like an economist, and designing firm level policies.

 

Full module specification

Module title:Financial Markets and Decisions 2
Module code:BEE3034
Module level:3
Academic year:2020/1
Module lecturers:
  • Professor David Kelsey - Convenor
Module credit:15
ECTS value:

7.5

Pre-requisites:

BEE2027

Co-requisites:

BEE3033 (4th year returners only)

Duration of module: Duration (weeks) - term 1:

11

Module aims

The module presents the theory of decision-making under risk and the economics of information and to discuss applications of the theory in the areas of banking and financial markets. The topics covered include expected utility theory, adverse selection, moral hazard, the Modigliani-Miller theorems and the incentive effects of debt and equity.

ILO: Module-specific skills

  • 1. understand key concepts of decision-making under uncertainty, the impact of uncertainty on firms and impact on financial markets.
  • 2. understand the choice between debt and equity financing. How financial decisions are affected by asymmetric information.

ILO: Discipline-specific skills

  • 3. understand the causes and consequences of moral hazard and adverse selection in financial markets.

ILO: Personal and key skills

  • 4. think analytically about financial markets and firms. Formal modelling of decisions and financial markets.
  • 5. study a range of teaching and research material and to work independently.

Learning activities and teaching methods (given in hours of study time)

Scheduled Learning and Teaching ActivitiesGuided independent studyPlacement / study abroad
201300

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Scheduled Learning and Teaching Activity20Lectures
Guided Independent Study130Reading, research and reflection. Preparation for exam and midterm.

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
A problem set for each topic and a revision sheet after all topics are completed. 11-5Written and verbal feedback after students have had the chance of going through the problem sheets on their own.

Summative assessment (% of credit)

CourseworkWritten examsPractical exams
20800

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Examination802 hours1-5Notes on solutions and guidance on ELE
Midterm2050 minutes1-5Written

Details of re-assessment (where required by referral or deferral)

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
Examination and MidtermExamination (100%) 2 hours1-5August/September Reassessment Period

Syllabus plan

  • Risk and the Cost of Capital – WACC (BMA, Chapter 9)
  • Agency Problems (BMA, Chapters 10 to 12)
  • Capital Structure – Modigliani and Miller Theorem (BMA, Chapters 16 to 19)
  • Mergers, Corporate Control, and Governance (BMA, Chapters 31 to 33)

Indicative learning resources - Basic reading

Brealey, Myers, and Allen (2014). Principles of Corporate Finance, McGraw Hill, 11th Global Edition

Module has an active ELE page?

Yes

Origin date

01/09/2007

Last revision date

03/03/2020