Economics 136: Financial Economics Spring 2022
Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit
Econ 136 Syllabus
Spring 2022
Economics 136: Financial Economics
This course is an introduction to financial economics. We will cover the theory and analytical tools used to make investment decisions as well as paradigms of security valuation. Important themes in the course include risk, return, arbitrage and diversification.
Financial economics is a quantitative subject. Calculus, statistics, and microeconomics are prerequisites. We will use calculus, statistics and analytical tools developed during the course. Use of a computational platform (e.g., Excel, MatLab, Python, etc.) will be important for some of the homework assignments.
Requirements
The course requirements are (i) ten graded problem sets, (ii) two midterm exams, and (iii) a final exam. Your course grade will be determined as follows:
Problem Sets 20%
Midterms 40% (20% each)
Final 40%
The first midterm will be on Tuesday, February 22nd and the second midterm will be on Tuesday, April 5th. The final exam will be on Wednesday, May 11th from 11:30 a.m. – 2:30 p.m..
Meeting Times, GSIs & Discussion Sections, Office Hours, and Communication.
The lecture portion of the class will be given live and recorded. The Zoom session for the course is on Tuesday and Thursday from 9:30 a.m. – 11:00 a.m.. In keeping with the tradition of “Berkeley time,” the first 10 minutes will be open for questions and not recorded. The video of the lecture will be posted later the same day in the Media Gallery folder on the bCourses site.
Sections will review background material, amplify & extend concepts introduced in the lectures, and explain analytical & computational techniques. Your GSI will also hold weekly office hours. Your first point of contact for questions regarding course material is your GSI. If the sections or meetings with your GSI do not resolve your questions, you are welcome to stop by my Zoom office hours (Wednesday, 1:30 – 3:00 p.m.) or at other times by appointment.
The primary form of communication regarding course material is Piazza. By posting your questions on Piazza, everyone—instructors and students—has the opportunity to answer and to learn from the Q&A. If you didn’t receive a Piazza welcome email, sign up at the Piazza course site. If you do send email to your GSIs or Prof. Hawkins, please put “Econ 136” somewhere in the subject line so your email is routed correctly.
Course Readings
|
●
●
● |
Readings will be assigned from the Course Reader available in both print and eReader formats from Copy Central. Other papers may be introduced in addition to the reader. I will assign readings for each lecture and expect that you will read the material as the course proceeds. A study guide with problems (and solutions) will be posted on bCourses. These prob- lems are designed to complement the lecture and section material. The exams will assume that you are able to solve all of the problems in the study guide for the material that has been covered at that point in the course. Later in the course there will be assigned readings from Manias, Panics, and Crashes: A History of Financial Crises by Charles Kindleberger and Robert Aliber. You will need the latest edition. |
Other works that you may find interesting include:
● Fixed Income Securities: Tools for Today’s Markets by Bruce Tuckman and Angel
|
●
●
● |
Serrat. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset by Aswath Damodaran. Expected Returns on Major Asset Classes by Antti Ilmanen (available for free download at www.cfapubs.org). This is a condensed version of his book – Expected Returns on Major Asset Classes. Continuous-Time Finance by Robert Merton. |
Lecture slides and videos will be posted on the bCourses course website.
Course Outline:
● Introduction, Overview and capital structure basics (the unit trust).
● Derivatives – The Contingent-Claims (CC) Valuation Paradigm. Covered- Interest Parity, Forwards, Futures, and Options. Put-Call Parity, Option Arbitrage, and Synthetic Options. The Black-Scholes Equation. Implied Volatility, Derivatives Risk Measurement and Management.
● Fixed Income – The Discounted Cash Flow (DCF) Valuation Paradigm. Present Value, Future Value and the Term Structure of Interest Rates. Yield-Curve Dynamics, Macroeconomics and the FOMC, Bank Regulation, and Price-Yield Rela- tionships. Duration, Convexity, Hedging, Floating-Rate Bonds and The Perfect Hedge. Swaps: Valuation and Uses for Hedging & Funding.
2022-01-17