KIMEP University
Course outline Fall 2013
Course title: Financial Economics
Course Code: ECN 3350
(3 credit hours/5 ECTS credits)
Course Meeting Time and Place:
Monday
14:30
-15:45
Wednesday 14:30
-15:45
NA
Instructor:
Dr. Gerald Pech
Office:
# 220 Valikhanov building
Telephone
3040
Email:
gpech@kimep.kz
Course Pages:
L-drive:
Gerald Pech/Mathematical Economics
Internet:
http://www.geraldpech.net/lectures/ECN3350
Office Hours
Instructor:
Monday, 11-12 pm, Tuesday 11-12 pm, Wednesday 10 am – 12 pm.
Course Description:
This course provides an introduction to modern financial economics. It applies
economic analysis and the theory of finance to the decision making problem of
consumers/investors and firms. Topics include portfolio selection, option pricing
and market efficiency. Students will learn techniques such as capital budgeting and
working capital management and learn how to address decision making problems
relating to mergers and acquisitions, bankruptcy and corporate reorganization.
Learning Objectives
 To master the analytical tools for financial decision making
 To understand the relationship between individual decisions and market
outcomes
Intended Learning Outcomes
At the end of course the students should be able to:
 Explain the relationship between consumption and investment planning
 Apply optimality criteria to financial decisions
 Describe the relationship between theoretical predictions and empirical
findings relating to the behavior of actors in financial markets
 Explain the role of risk in financial decision making
 Derive the optimal portfolio allocation
 Explain the role of different financial instruments
Relationship between Course and Program
Prerequisites: ECN2103 and ECN2083
This course is prerequisite for: no other course
Learning Activities
Apart from attending class, you should engage in the following activities:
Preparing lectures: Read the text book chapters in advance! (1 hour per week)
Practicing and reviewing lectures: After finishing each major chapter, I will post
problem sets and review questions which will help you practicing and reviewing the
material. (2 hours per week)
Preparing for exams:
Before the midterm and the final, I will post assignments which familiarize you with
the style and lay out of the exam. Exams will consist of a short answer section, a
problem solving section and a short essay, so you should practice your skills at
memorizing, writing and problem solving. (Preparation time for reviewing and doing
assignments: 20 hours for midterm, 20-25 hours for the final).
Course Outline/Lectures
Week
Date
Subject
1
02.09.
1. Introduction
Reading
04.09.
2
3
09.09.
2. Allocating Resources over Time
11.09.
“
16.09.
3. Risk Taking Behavior: Theory
18.09.
4
23.09.
BMC, Chpt 4, 5, 6
Pindyck/Rubinfeld
Chpt. 5
4. Efficient Markets and Asset Valuation
BMC, Chpt 7
25.09.
5
30.09.
5. Behavioral Finance
02.10.
6
7
8
07.10.
10.10.
Assignment 1 due
14.10.
Review Class
16.10.
Midterm Exam
21.10.
6. Risk Management
BMC, Chpt 10, 11
7. Portfolio Theory and CAPM
BMC, Chpt 12, 13
8. Forward and Future Markets
BMC, Chpt 14
9. Options
BMC, Chpt 15
10. Principles of Corporate Finance
BMC, Chpt 16
11. Real Options
BMC, Chpt 17
23.10.
9
28.10.
30.10.
10
04.11.
06.11.
11
11.11
13.11.
12
18.11.
21.11.
13
25.11.
27.11.
14
02.12.
04.12.
15
“, Assignment 2 due
09.12.
11.12.
Review Class
Assessment Scheme
I. Continuous Assessment:
Two assignments
Quizzes (2 / 3)
Midterm
Sum continuous assessment:
10 %
10 %
40 %
60 %
II. Final Examination:
Total
40 %
100%
Grading Scale (see course catalogue)
A+
90-100
C+
67-69
A
85-89
C
63-66
A-
80-84
C-
60-62
B+
77-79
D+
57-59
B
73-76
D
53-56
B-
70-72
D-
50-52
F
0-49
Course Policies and Instructor’s Expectations of Students
Attendance
Attendance is strongly encouraged but ultimately it is in the responsibility of the
individual student. Note, however, that there will be at least 3 short, unannounced
quizzes during the semester and each student is expected to participate in at least
two of them to get full marks. When in the class room, students have to conduct
themselves in such a way as to foster an effective learning environment.
Honesty
Cooperation between students in doing the assignments is encouraged. Do not,
however, try to cooperate during exams! Any attempt at cheating will result in zero
marks on the exam. Rules and procedures for cheating apply as laid out in the
KIMEP catalogue.
Instructional Resources
The main textbook is:
 Bodie, Z., Merton, R.C., Cleefton, D.L., Financial Economics, 2nd ed., Pearson
2009, cited as BMC.
Supplementary texts
 Bodie, Z., Kane, A., Marcus, A., Investments, 8th ed., McGraw-Hill 2010.
 Forbes, W., Behavioural Finance, Wiley 2009.
All other course materials can be found in the L-drive folder “Gerald Pech/
Spring 2013/Mathematical Economics”. Excellent instructional resources can also be
found on Robert Shiller’s webpage: http://oyc.yale.edu/economics/econ-252-11
For additional readings and links to other interesting websites visit our course page
at www.geraldpech.net/lectures/ECN3350.
Dates for the topics of the class sessions are tentative. This syllabus is subject to
preannounced changes.