ECMC49Y
Syllabus, Summer 2006
UTSC
ECMC49S: Financial Economics
Instructor:
Email:
Class Time:
Location:
Office hours:
Office:
Website:
Travis NG
ngkaho@chass.utoronto.ca
Wed 9 to 11am
MW160
Wed 11 to 12pm
MW379
http://www.chass.utoronto.ca/~ngkaho/ECMC49Y
Prerequisites:
Microeconomics (ECMB02H or ECO200 or 206),
Macroeconomics (ECMB06H or ECO202 or 208),
Statistics (ECMB09Y or ECO220)
Course Description:
This course is comprised of 3 main parts:
1) Individual decisions under uncertainty
2) Asset pricing
3) Market Efficiency
Goal:
My goal is to deliver a broad but rigorous introduction to the theoretical
foundations of modern financial economics. Your goal is 1)to have a good
understanding of the theories covered in the course and 2)develop the
linkage between financial theories and various economics models you
have been studied in your previous economics classes.
Upon completion of this course, students will be able to:
1) Calculate equilibrium asset prices
2) Determine equilibrium portfolio allocations given price and risk
preferences
3) Be able to tell how risk allocations and asset prices will change as the
characteristics of uncertain outcomes change.
Important Dates:
Term Test:
Drop Deadline:
Final Exam:
Jun 21, 2006
Jul 23, 2006
Any date between Aug 12 - Aug 24
Grading:
50% midterm, 50% final if you do better in the midterm than in the final.
25% midterm, 75% final if you do better in the final than in the midterm.
This is a mechanism to encourage you to work harder in your final in
case your midterm mark is not satisfactory.
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ECMC49Y
Syllabus, Summer 2006
UTSC
Main Textbook Reference:
Thomas E. Copeland and J. Fred Weston, Financial Theory and Corporate
Policy, Addison Wesley, 2005 Fourth Edition (available in Bladen library
Short term loan, type “ECMC49” in library catalogue course reserves).
The course’s material is mainly from this classic textbook. But you do
not have to buy the textbook to do well in the course.
Problem sets:
There will be assigned questions for each topics covered. You do not need
to hand them in for grading. But previous students performance has
shown that those who had tried them out performed relatively better in
the course. Ideally, you team up with one or two of your classmates to
form a study group to try the assigned questions.
Appeals:
If you appeal to re-grade the midterm, please submit your complaint to
me in written format. I will re-grade not only the parts that you have
complained, but also the other parts that you have not. Note that this
may lead to a lower overall grade.
Missing the Midterm:
If you miss the midterm due to an approved reason, you must submit
official documentation either to me or to the department of management
within one week of the missed test. For medical reason, you must provide
a signed and detailed copy of the UofT student medical form from the
following URL:
http://www.utoronto.ca/health/forms/medcert.pdf
For any other reason, such as time conflicts among tests, please come
and see me before the midterm to get approval.
Approved students will have 100% of their grading weight shifted to the
final. Non-approved students will have 25% of their grading weight
assigned as zero.
Other places where I draw course materials from:
For your references, here are some places that I read to draw the lecture
materials from. You will not be tested on materials in these references
that are not covered in the lectures.

Bodie, Kane, Marcus, Perrakis, Ryan: Investments, 5th Canadian
Edition, 2005, McGraw-Hill.

John C. Hull: Fundamentals of Futures and Options Markets, 5th
Canadian Edition, Prentice Hall.
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ECMC49Y
Syllabus, Summer 2006
UTSC

Brealey and Myers: Principles of Corporate Finance, 6th Edition,
2000, McGraw-Hill.

Chicago Board Options Exchange website

Options Clearing Corporation website

Options Industry Council website
Course Structure:
Session Date
1
May 10
2
May 17
3
May 24
4
May 31
5
Jun 7
6
Jun 14
7
Jun 21
8
Jun 28
*
Jul 5
9
Jul 12
10
Jul 19
11
Jul 26
12
Aug 2
Lecture Description
Basics of Financial Market
Inter-temporal Consumption Choice
Decisions under Uncertainty
Portfolio Theory
CAPM I: Theory
CAPM II: Empirics
Midterm
Option Pricing I: Basics
Reading Week
Option Pricing II: Advanced
Efficient Market Hypothesis I: Theory
Efficient Market Hypothesis II: Empirics
Portfolio’s Rate of Return Calculations
Readings:
The main readings are the lecture notes. In addition, as the course
progresses, I will update you about the precise supplementary readings
that you may want to do prior to the midterm and final. The first priority,
however, is to master the lecture notes provided in the course website.
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