Prof Ian Martin OLD 3.42, Dr Amil Dasgupta OLD 3.45 and Dr Igor Makarov OLD M3.08

This course is compulsory on the MRes/PhD in Finance (Route 1), MSc in Finance and Economics and MSc in Finance and Economics (Research). This course is not available as an outside option.

Mathematical background at the level of the September Courses in Mathematics and FM458 Financial Economics Preparatory Course is assumed.

Financial Economics provides students with an in-depth introduction to the theories of asset pricing and corporate finance. The course analyses investors’ behaviour, market equilibrium, the pricing of securities, the valuation of real assets, and capital structure choice. Topics in asset pricing will encompass portfolio choice, complete and incomplete markets, mean-variance portfolio theory and equilibrium asset pricing, pricing with no arbitrage, Black-Scholes and other contingent claims pricing models, and the behaviour of financial markets during crises. Topics in corporate finance will encompass valuation methods and financing decisions in the presence of taxation, agency frictions, and asymmetric information.

40 hours of lectures and 20 hours of seminars in the MT.

Problem sets, covered in classes.

Will be based on: Teaching notes and journal articles, as well as J H Cochrane, Asset Pricing, Revised Edition, Princeton University Press.

Exam (100%, duration: 3 hours) in the main exam period.