goto UNSW  home page  
Contacts Library myUNSW WebCT
 Economics of Finance - ECON3107
PRINT THIS PAGE
 Science students
   
   
 
Contact: Caisley,Nadine Lee-Anne
 
 
Campus: Kensington Campus
 
 
Career: Undergraduate
 
 
Units of Credit: 6
 
 
EFTSL: 0.125 (more info)
 
 
Contact Hours per Week: 3
 
 
Enrolment Requirements:
 
 
Prerequisite: ECON2101
 
 
Session Offered: See Class Timetable
 
 
Fee Band: 2 (more info)
 
  

Description

Provides a treatment of the microeconomic foundations of modern finance. Many valuation or pricing formulas in modern finance are derived from the requirement that arbitrage profits are non-existent in properly functioning capital markets. The aim of the course is to show that the valuation formulas used in modern finance can also be derived from the microeconomic theory of markets in general equilibrium. Begins with a discussion of how economics agents make decisions when some aspect of the economic environment in which they operate is uncertain. This entails a discussion of expected utility theory and stochastic dominance, which form the cornerstone of modern financial economics. Asset pricing models are developed within the context of general eqilibrium portfolio choice problems. The notion that uncertainty in the economic environment can be dealt with by the introduction of state-contingent securities and that these securities lead to efficient market outcomes is fully discussed. The micoreconomic theory underlying the determination of firms' value is developed. This leads to a discussion of the Modigiliani-Miller proposition that the capital structure of the firm is irrelevant in determining its value. The course concludes with a discussion of the implications of informational asymmetrics for financial theories, with particular emphasis on insurance markets.

URL for this page:

© The University of New South Wales (CRICOS Provider No.: 00098G), 2004-2011. The information contained in this Handbook is indicative only. While every effort is made to keep this information up-to-date, the University reserves the right to discontinue or vary arrangements, programs and courses at any time without notice and at its discretion. While the University will try to avoid or minimise any inconvenience, changes may also be made to programs, courses and staff after enrolment. The University may also set limits on the number of students in a course.