BE312-5-FY-KS:
Quantitative Foundations of Finance
2020/21
Essex Business School
Kaplan Singapore
Full Year
Undergraduate: Level 5
Current
Thursday 08 October 2020
Friday 02 July 2021
15
08 September 2020
Requisites for this module
(none)
(none)
(none)
(none)
(none)
BSC N390JS Banking and Finance,
BSC N390NS Banking and Finance
This is not an introductory module in finance. Tools and techniques that are basic for a quant career in finance, from mathematics, such as algebra and calculus will be taught on the module. Some prior computing skill in managing large amounts of data is necessary as well as a willingness to learn further computing skills in Maple, which will be demonstrated on the module.
The module carefully examines the building blocks of modern finance theory and focuses on the theoretical and analytical cornerstones on which the building blocks are placed. We study how these building blocks can, in certain cases, help us identify potentially optimal decisions now, even though their future consequences are still uncertain.
A common feature of finance is the need to make good use of, and where possible the best use of limited resources; constrained optimization techniques, which are taught on the module, can often guide us in this need. Since concepts in probability are widely employed in finance to describe the inevitable uncertainty regarding the future, we examine its basic elements. It is a near universal truth that most of us dislike risk and prefer to avoid risk. We also find that we will avoid risks only if the price for avoiding that risk is acceptable. We study how expected utility theory helps us measure how averse we are to taking such risks.
We then proceed to apply these building blocks to examine several concepts: choice under uncertainty, maximizing returns and minimizing risk subject to constraints, mean-variance analysis and the capital asset pricing model. Finally, we show how real options can often help improve corporate investment decisions as compared to traditional approaches that employ the net present value rule.
The aim of this course is to familiarize you with the mathematical tools and the analytical skills necessary to understand the theory of finance.
On successful completion of the module, you will be able to:
1) Apply mathematical techniques and tools employed in finance.
2) Describe and evaluate measures of risk aversion using expected utility theory.
3) Understand the concept of ‘efficient frontier’ when investing in risky assets.
4) Evaluate investment decisions employing Real Options and NPV approaches.
Skills for Your Professional Life (Transferable Skills)
The module, class activities and coursework will help you to develop the following transferable skills:
a) solve practical problems that need to make best use of limited resources.
b) choose a portfolio of assets that best suit the needs of professional investors.
c) employ Maple software to solve quantitative problems in finance.
d) support the decision making activities associated with capital budgeting decisions.
There will be one class per week associated with each lecture, each of one-hour duration, for ten weeks. The class will lag the corresponding lecture by one week. There are weekly class exercises, which will normally be released before the relevant class but after the associated lecture. You are advised to make an attempt at all the exercises. Class work will need to be handed in each week but are neither marked nor evaluated. Several exercises are solved using the mathematical software called Maple, which can be accessed from the machines in the university's labs. It is good to know how to use at least one mathematical and modelling software and Maple is adequate for that.
- Copeland, Thomas E.; Shastri, Kuldeep; Weston, John Fred. (2014) Financial theory and corporate policy, Harlow: Pearson Education.
- Luenberger, David G. (2014) Investment science, Oxford: Oxford University Press.
- Sydsæter, Knut. (©2016) Essential mathematics for economic analysis, Harlow: Pearson Education Limited.
The above list is indicative of the essential reading for the course. The library makes provision for all reading list items, with digital provision where possible, and these resources are shared between students. Further reading can be obtained from this module's reading list.
Assessment items, weightings and deadlines
| Coursework / exam |
Description |
Deadline |
Coursework weighting |
Additional coursework information
Assessment
One examination and a compulsory coursework component are the means of assessment on the course. The coursework component carries 45% of the weight and the examination component carries 55% of the weight.
You may also want to bear in mind that in assessing the module, the standard of the assignments and the answers to the examination questions will be expected to reflect the effort that comes from allocating eight hours a week to this module. The final examination, tests and assignments are set on the assumption that you will have spent sixty hours on your own for the module. You can either allocate the sixty hours of self-study spread out over several weeks of the term or all at the end of the year, a few weeks before the final examination. I will leave it up to you to decide the riskier option!
Coursework
The details of the coursework will be distributed during the term. The coursework is compulsory and is not optional. Coursework consists of two assignments and two tests (tests are without advance notice). The best three out of the total four pieces of work will count equally towards the coursework mark. The tests usually cover material taught up to the prior week’s class. The assignments will cover a wider array of contexts than of the finance covered in the module to show that some of the ideas and concepts covered on the module transfer outside of finance.
Exam format definitions
- Remote, open book: Your exam will take place remotely via an online learning platform. You may refer to any physical or electronic materials during the exam.
- In-person, open book: Your exam will take place on campus under invigilation. You may refer to any physical materials such as paper study notes or a textbook during the exam. Electronic devices may not be used in the exam.
- In-person, open book (restricted): The exam will take place on campus under invigilation. You may refer only to specific physical materials such as a named textbook during the exam. Permitted materials will be specified by your department. Electronic devices may not be used in the exam.
- In-person, closed book: The exam will take place on campus under invigilation. You may not refer to any physical materials or electronic devices during the exam. There may be times when a paper dictionary,
for example, may be permitted in an otherwise closed book exam. Any exceptions will be specified by your department.
Your department will provide further guidance before your exams.
Overall assessment
Reassessment
Module supervisor and teaching staff
Dr Hardy Thomas, email: hardt@essex.ac.uk.
Dr Hardy Thomas
ebsugcol@essex.ac.uk
No
No
No
No external examiner information available for this module.
Available via Moodle
No lecture recording information available for this module.
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