Course content

The course presents the major insights from financial economics in a way that utilizes the quantitative skills of engineering students. Topics include the analysis and decomposition of risk and the (Nobel prize winning) methods to price risk on financial markets, such as the Capital Asset Pricing Model, Arbitrage Pricing Theory and Option Pricing Models. Real options analysis of flexibility in investments and modern theories of market efficiency and financial contracting (agency theory) are also discussed. The insights are applied to decision making problems in portfolio-selection and -optimization, investment analysis, risk management and corporate finance.

Learning outcome

The course gives students a thorough understanding of the pricing methods from the modern theory of finance and develops the students’ skills to use this knowledge in practical decision making problems regarding investment, financing and risk management, both in a business and a private context.

Learning methods and activities

Lectures and exercises. The course will be taught in English. The re-examination, if any, may be oral instead of written.

Recommended previous knowledge

The course assumes some knowledge of financial calculus (such as present value calculation) and micro-economics. Students can acquire this knowledge by studying the non-mandatory part of the course material.

Course materials

To be announced at semester start.

Credit reductions