Module
Financial Markets and Decisions 2
Module description
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, the Modigliani-Miller theorems and the incentive effects of debt and equity.
Additional Information:
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: | 2023/4 |
| Module lecturers: |
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| Module credit: | 15 |
| ECTS value: | 7.5 |
| Pre-requisites: | BEE2027 |
| Co-requisites: | None |
| Duration of module: |
Duration (weeks) - term 1: 11 Duration (weeks) - term 2:0 Duration (weeks) - term 3:0 |
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 Activities | Guided independent study | Placement / study abroad |
|---|---|---|
| 25 | 125 | 0 |
Details of learning activities and teaching methods
| Category | Hours of study time | Description |
|---|---|---|
| Scheduled learning and teaching activity | 20 | Lectures |
| Scheduled learning and teaching activity | 5 | Seminars |
| Guided independent study | 125 | Reading, research and reflection. Preparation for exam and midterm |
Formative assessment
| Form of assessment | Size of the assessment (eg length / duration) | ILOs assessed | Feedback method |
|---|---|---|---|
| A problem set for each topic and a revision sheet after all topics are completed | 1 | 1-5 | Written and verbal feedback after students have had the chance of going through the problem sheets on their own |
Summative assessment (% of credit)
| Coursework | Written exams | Practical exams |
|---|---|---|
| 20 | 80 | 0 |
Details of summative assessment
| Form of assessment | % of credit | Size of the assessment (eg length / duration) | ILOs assessed | Feedback method |
|---|---|---|---|---|
| Examination | 80 | 2 hours | 1-5 | Notes on solutions and guidance on ELE |
| Midterm | 20 | 1 hour | 1-5 | Written |
| 0 | ||||
| 0 | ||||
| 0 | ||||
| 0 | ||||
| 0 | ||||
| 0 |
Details of re-assessment (where required by referral or deferral)
| Original form of assessment | Form of re-assessment | ILOs re-assessed | Timescale for re-assessment |
|---|---|---|---|
| Midterm | Midterm (1hour) (20%) | 1-5 | August/September reassessment period |
| Examination | Examination (2hours) (80%) | 1-5 | August/September reassessment period |
Syllabus plan
- Estimating the Cost of Capital (Berk and DeMarzo, Chapter 12)
- Modigliani-Miller Theorem (Berk and DeMarzo, Chapter 14)
- Capital Structure: Debt and Taxes (Berk and DeMarzo, Chapter 15)
- Capital Structure: Agency Problems (Berk and DeMarzo, Chapter 16)
- Capital Structure: Payout Policy (Berk and DeMarzo, Chapter 17)
- Valuation and WACC (Berk and DeMarzo, Chapters 18 to 19)
Indicative learning resources - Basic reading
Berk and DeMarzo (2020) Corporate Finance (5th Edition), Pearson Edition.
Module has an active ELE page?
Yes
Origin date
01/09/2007
Last revision date
13/03/2023