Modiwl ASB-3143:
Financial Economics

Overview

The content includes Expected Utility Theory (EUT), risk aversion, Mean-variance model, critiques and alternative models to EUT, insurance decisions, value of information, adverse selection, moral hazard, principal-agent problem, applications in finance and banking theory.

Assessment Strategy

-threshold -D- to D+ (40-49%): No major omissions or inaccuracies in the deployment of information/skills. Some grasp of theoretical/conceptual/practical elements. Integration of theory/practice/information present intermittently in pursuit of the assessed work's objectives. -good -B- to B+ (60-69%): Very good performance Most of the relevant information accurately deployed. Good grasp of theoretical/conceptual/practical elements. Good integration of theory/practice/information in pursuit of the assessed work's objectives. Evidence of the use of creative and reflective skills. -excellent -A- to A+ (70%+): Outstanding Performance. The relevant information accurately deployed. Excellent grasp of theoretical/conceptual/practice elements. Good integration of theory/practice/information in pursuit of the assessed work's objectives. Strong evidence of the use of creative and reflective skills. -another level-C- to C+ (50-59%): Much of the relevant information and skills mostly accurately deployed. Adequate grasp of theoretical/conceptual/practical elements. Fair integration of theory/practice/information in the pursuit of the assessed work's objectives. Some evidence of the use of creative and reflective skills.

Learning Outcomes

• Analyse and critique various theories in finance and banking.

• Analyse the workings of insurance markets.

• Assess the value of information to economic agents and analyse the impact of assymetric information on economic outcomes.

• Calculate and critique measures of risk aversion.

• Critically analyse the issues of time-inconsistency in modelling financial decision-making.

• Explain the underlying assumptions of Expected Utility Theory and how they can be used to derive prescriptions for how people might or should behave under uncertainty.