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
Students admitted to study programmes at UiO must each semester register which courses and exams they wish to sign up for in Studentweb.
Students not admitted to the Master’s programme in Economics or the Master’s programme in Economic Theory and Econometrics (Samfunnsøkonomisk analyse), can apply for admission to one of our study programmes, or apply for guest student status.
Formal prerequisite knowledge
You must fulfill one of these prerequisites:
- Bachelor's degree in Economics, or equivalent.
- ECON3220 – Microeconomics 3 / ECON4220 – Microeconomics 3, or equivalent.
Recommended previous knowledge
- Students who do not have ECON3120 – Mathematics 2: Calculus and Linear Algebra / ECON4120 – Mathematics 2: Calculus and Linear Algebra or equivalent, are advised not to take this course.
- 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 and seminars.
Normally, this course has a 3-hour written school exam.
For the spring 2020 applies:
The examination will be a home examination in Inspera. The home exam will be an open-book exam, where all written and printed resources as well as technical support is allowed. The time schedule will be published on the semester page.
Submit assignments in Inspera
You submit your assignment in the digital examination system Inspera. Read about how to submit your assignment.
Use of sources and citation
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
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.