Economics B: Finance

In a developed market economy, capital markets fulfil several important functions. Among the most important of these is the channelling of resources from sectors with a savings surplus to sectors with a deficit. Capital markets also have a central function as concerns the distribution of risk-taking between different investors. For the capital markets to be able to fulfil these functions, a well-functioning price formation mechanism is required. The course discusses basic concepts and techniques for analysing financial decisions. The following areas are discussed in the course: * Present value calculations and present value models * Pricing models for risky financial assets * The efficient market hypothesis * The money and bond market * The financing choices and capital costs of the firm * Derivative instruments - option pricing theory