FINANCIAL ECONOMICS

           （Spring,2011）

Lecture: Zhao Guiqin

Office room: 毓秀楼, room 222

Office hours: Tuesday，2:00pm～5:00pm or contact by email

E-mail：zhao_guiqin@126.com

Telephone: 65908419

Course Details

Course Name: financial economics

Credit Points:4

Course Coordinator:
陶雪松

This course corresponds to the first part of actuarial professional subject CT8 financial economics

Text Books Subject CT8: financial economics, IoA, 2008
Reference Books

- Baxter, M. and A. Rennie “Financial Calculus : An Introduction to Derivative Pricing”, Cambridge University Press, 1996.

- Luenberger, D.G. “Investment Science”, Oxford University Press, 1998.

Assumed Knowledge and Skills

Students are assumed to have knowledge of probability and statistics to the level covered in the course CT3 Probability and Statistics for Actuaries (or equivalent courses in the School of Mathematics)， CT4 Models. They should also be proficient with calculus and linear algebra. Students need to be able to use a computer to analyze mathematical and statistical problems.

Course Description

Financial economics forms an important component of actuarial work as it studies theeconomics of financial markets. We will investigate how investors respond to different markets and its effects on pricing and management of financial risks. Our core focus will be on pricing financial products, especially with derivatives such as options. We also look into different market models, with a view to adapting these into modeling asset-liability profiles. The course is essentially quantitatively focused, although we will take an analytical and practical approach where appropriate.

Course Objectives

This course aims to develop students with the following skills :

1. Appreciate the fundamentals of financial economics.

2. Apply stochastic processes into valuing financial instruments.

3. Apply stochastic processes into modelling interest rates and credit risks.

4. Implement financial economic concepts into practice.

5. Integrate technical, programming and superior writing skills to deliver professional reports.

Assessment The following table gives an indication of the relative weighting of the assessment components:

Class Tests /work on attendence

30%

Final Examination
70%

Total
100%

Important dates to remember are Class Tests:

Test 1 :surprise

Test 2: surprise

There will be a number of quizzes held during the session. These quizzes are worth 30% of total assessment for the course. Quizzes will not be announced in advance of the tutorial. If you do not attend your test on the date of the quizzes you will score zero for the quizzes. Normal examination rules apply to the conduct of quizzes. Students who believe that their performance in this course, either during session or in an examination, has been adversely affected by sickness, misadventure or other circumstances beyond their control may apply for special consideration for affected assessments.