ECON4510 - Finance Theory
Schedule, syllabus and examination date
- Individual decision-making under uncertainty, in particular expected utility and the mean-variance criterion.
- Portfolio choice and separation.
- Capital asset pricing models (also without riskless asset) and complete markets for state contingent claims, spanning, consequences for investment decisions.
- Market efficiency, information Paradox.
- Theory of pricing of derivative assets, such as forward and futures contracts and in particular options.
You should know
- the basic theory of portfolio choice and different equilibrium models for financial markets under one-period uncertainty
- when, how, and to what extent the models are applicable
- some elements of empirical research in the field
- implications of the theory for capital budgeting and financing decisions in the private sector
- the basics of absence-of-arbitrage pricing models applied to financial options which include binomial trees in discrete time as well as diffusions in continuous time.
You should be able to
- use the various measures of risk for individual assets and for portfolios which includes what sources can be used to estimate these, how they are calculated, and how they are affected by, e.g., combining assets
- disentangle information about real-world assets, e.g., financial assets (and loans), to find the relevant measures of risk and expected returns
- introduce relevant concepts of risk both in theoretical and practical considerations
- be able to read and understand project reports and journal articles that make use of the concepts and methods that are introduced in the course
- be able to make use of the course content in your own academic work, for example in analyses that are part of the master’s thesis
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If you are not already enrolled as a student at UiO, please see our information about admission requirements and procedures.
Apply for guest student status if you are admitted to another Master's programme, or have completed a master in Economics at UiO or another Norwegian University.
Formal prerequisite knowledge
- Bachelor's degree in Economics, or equivalent.
- Students on the master’s programme in Economic Theory and Econometrics (the 5-year programme) need ECON3010 - Anvendt økonomisk analyse.
Recommended previous knowledge
- Mathematics at least at the level of ECON3120 - Mathematics 2: Calculus and Linear Algebra / ECON4120 - Mathematics 2: Calculus and Linear Algebra.
- Some background in statistics at least at the level of ECON2130 - Statistikk 1.
- Microeconomics at the level of ECON3200 - Microeconomics and Game Theory / ECON4200 - Microeconomics and Game Theory
- 8 credits overlap with MAT2700 - Introduction to mathematical finance and investment theory (continued)
- 5 credits overlap with ECON4515 - Finance Theory 1: Portfolio choice and equilibrium models (discontinued)
- 5 credits overlap with ECON4520 - Finance Theory 2: Option theory with applications (discontinued)
Lectures: 2 hours per week throughout the semester.
Seminars: 2 hours per week through parts of the semester.
A 3-hour written school exam.
Examination support material
Students may use dictionaries at this exam. Dictionaries must be handed in before the examination. Please read regulations for dictionaries permitted at the examination.
Language of examination
The examination text is given in English.You may submit your response in Norwegian, Swedish, Danish or English.
Grades are awarded on a scale from A to F, where A is the best grade and F is a fail. Read more about the grading system.
Explanations and appeals
It is recommended to request an explanation of your grade before you decide to appeal.
The deadline to request an explanation is one week after the grade is published. For oral and practical examinations, the deadline is immediately after you have received your grade.
The explanation should normally be given within two weeks after you have asked for it. The examiner decides whether the explanation is to be given in writing or verbally.
Ask for explanation of your grade in postponed exam for this course.
Resit an examination
If you are sick or have another valid reason for not attending the regular exam, we offer a postponed exam later in the same semester.
See also our information about resitting an exam.
Withdrawal from an examination
It is possible to take the exam up to 3 times. If you withdraw from the exam after the deadline or during the exam, this will be counted as an examination attempt.
Special examination arrangements
Application form, deadline and requirements for special examination arrangements.
The course is subject to continuous evaluation. At regular intervals we also ask students to participate in a more comprehensive evaluation.