Entry requirements

At least 15 credits from Economics A.

Learning outcomes

After completing the course, the student is expected to be able to:

- understand and explain the role of the capital market in the allocation of resources

- discuss price formation on financial markets

- analyse how the behaviour of financial agents (households, firms, institutions etc.) affects the capital markets

- identify and describe the institutional conditions on financial markets

Content

In a developed market economy, the capital markets fulfil several important functions. Among the most important of these is the channelling of resources from sectors with a savings surplus to sectors with a deficit. Capital markets also have a central function as concerns the distribution of risk taking between different investors. For the capital markets to be able to fulfil these functions, a well-functioning price formation mechanism is required. The course discusses basic concepts and techniques for analysing financial decisions. The following areas are discussed in the course:

a. Present value calculations and present value models

b. Pricing models for risky financial assets

c. The efficient market hypothesis

d. The money- and bond market

e. The financing choices and capital costs of the firm

f. Derivative instruments – option pricing theory

Instruction

The instruction consists of lectures.

Assessment

The assessment consists of a written exam.