Financial Economics

The course provides an introduction to the field of financial economics with a focus on the open economy. Short- and long-term relationships between money supply, price levels, interest rates, and exchange rates in an open economy are analyzed. The interest rate parity condition and monetary policy in an open economy with fixed and floating exchange rates are discussed. Subsequently, various interest-bearing instruments are examined. Concepts central to the valuation and management of financial assets, such as the fundamental relationship of the money market and the relationship between interest rates and maturities, are covered. The course also covers stocks and their valuation. In connection with this, the efficient market hypothesis is presented, along with how behavioral economics can influence investors' decisions. Additionally, an introduction to modern portfolio theory is provided, including Markowitz's portfolio selection model and the CAPM model.