Unit information: Financial Markets and Corporate Policy in 2014/15

Unit name	Financial Markets and Corporate Policy
Unit code	ECONM2033
Credit points	15
Level of study	M/7
Teaching block(s)	Teaching Block 2 (weeks 13 - 24)
Unit director	Dr. Friederich
Open unit status	Not open
Pre-requisites	ECONM1007 Finance and Accounting
Co-requisites	None
School/department	School of Accounting and Finance - Business School
Faculty	Faculty of Social Sciences and Law

Description including Unit Aims

Financial Markets and Corporate Policy provides a more in depth treatment of some core topics in finance, building on the material covered in ECONM1007 Finance and Accounting. The unit begins with a review of standard CAPM theory before discussing the limitations of that model and developing several more recent alternatives. Derivatives markets and pricing are then covered. The unit then moves on to examine some topics in corporate finance e.g. the effect of agency issues in capital structure decisions and the role played by information decisions in firms and choice of payout policies. Finally students are given an introduction to fundamental analysis and equity valuation.

Aims:

This unit aims to develop students’ understanding of core Finance issues, building on their knowledge from Finance and Accounting (ECONM1007). It aims to provide in-depth analysis of topics including derivatives markets and pricing, and core corporate finance topics, centering on the role of agency problems and asymmetric information in corporate financial decisions.

Intended Learning Outcomes

On successful completion of this unit, a student will be able to:

• Understand the pricing and use of the main classes of financial derivatives, including forwards, futures, options and swaps.

• Be able to construct arbitrage and speculative strategies involving derivatives and their underlying assets and borrowing or lending.

• Understand the role of asymmetric information and agency theory in determining corporate financing policy: capital structure, dividend policy, etc.

• Understand the theory and mechanics of mergers and acquisitions and new issues (IPOs).

Teaching Information

Standard lectures, exercise lectures and classes.

Assessment Information

In terms of formative assessment, the students will have to do one piece of assessed coursework asking them to demonstrate their understanding of the key points learned in the lectures.

The unit is assessed via a three-hour examination in the Summer.

• Essay questions will assess students’ in-depth knowledge of topics such as the capital structure decision and students’ ability to critically evaluate the variety of theoretical contributions presented in a given area.

• Questions involving calculations will test students’ ability to apply some of the material they have encountered.

• Mathematical questions will test students’ ability to derive models they have encountered.

Students will be expected to demonstrate competence in all of these areas.

Reading and References

• Hull, Fundamentals of Futures and Options Markets, Prentice-Hall, current ed.

• Grinblatt & Titman, Financial Markets and Corporate Strategy, McGraw-Hill, current ed.