Course content

The course builds on and expands the students' skills in financial theory and applications, focusing on asset/option pricing theory in particular. This is used in analysing financial securities/instruments and real assets, and in project evaluation under uncertainty using real option analysis. The course includes a description of technical and economic characteristics of project risk and an option-based valuation of flexibility in projects. The knowledge and theory is also applied to analysis of compound financing strategies and financial instruments.

Learning outcome

To give a theoretical foundation regarding project evaluation and asset pricing under uncertainty. Training to think about general projects as a collection of real options. The students should aquire the skills necessary to analyse stylized projects under uncertainty, and to value and hedge cash flows coming from positions in common derivative financial securities.

Learning methods and activities

Lectures and exercises. Portfolio assessment is the basis for the grade in the course. The portfolio includes a final written exam (85%) and a term paper (15%). The results for the parts are given in %-scores, while the entire portfolio is assigned a letter grade.The course language will be English if English speaking students are enrolled. If there is a re-sit examination, the examination form may change from written to oral.

Compulsory assignments

• Exercises

Recommended previous knowledge

TIØ4145 Corporate Finance.

Course materials

Assigned at course start.

Credit reductions