Unit information: Quantitative Finance in 2015/16

Unit name	Quantitative Finance
Unit code	ECONM2029
Credit points	15
Level of study	M/7
Teaching block(s)	Teaching Block 2 (weeks 13 - 24)
Unit director	Professor. Stoja
Open unit status	Not open
Pre-requisites	None
Co-requisites	None
School/department	School of Economics, Finance and Management
Faculty	Faculty of Social Sciences and Law

Description including Unit Aims

An appreciation of the quantitative side of finance is becoming increasingly important for those working in both the practical and academic sides of the discipline. This unit aims to equip students with an understanding of the basic econometric tools that one will encounter in financial research and the ability to apply these tools to genuine financial data. As such, students will build on their prior econometric knowledge to develop a suite of financial econometric models, build skills in handling financial data and further will be instructed in the application of the models using standard statistical computer applications. Thus the unit is appropriate for students with prior knowledge of econometrics and finance who wish to develop the quantitative skills appropriate for applied financial research or work on the quantitative side of trading and asset management. Financial Econometrics

Intended Learning Outcomes

Having successfully completed this unit students should be able to;

• Detail the standard features of financial return data from stocks, bonds and currencies at various sampling frequencies.

• Extract and handle financial data from a variety of sources.

• Develop and apply methods for assessing dependence in financial returns and volatilities and develop and apply models for such dependence.

• Derive and apply some basic financial forecasting techniques.

• Develop techniques for testing asset pricing models using regression analysis and generalised method of moments.

• Develop models specific to the handling of high-frequency (e.g. intra-day) financial data.

Teaching Information

20 contact hours split between lectures, classes and laboratory work (typically 10 hours lectures, 5 hours classes, 5 hours computing laboratories).

Assessment Information

The course will be assessed by individual and group assignment. The assessment is designed to examine a mix of finance problems frequently encountered in practice such as the knowledge of the features of financial data and why understanding these features is important from an asset management and/or quantitative trading point of view. In this way, the ILOs specified above will be assessed.

Assessment is split into two components. The first is an individual component. Each student submits a short report (of no more than one side of single spaced A4) for four of the practical sessions. This report should summarise the motivation, method used and results obtained, and offer a critical assessment of the limitations of the practical exercise. Each report accounts for 10% of the total mark (40% overall).

The second is a group component. Four of the practical sessions will include an ‘assignment task’. This essentially asks the students to repeat the practical session using a fresh company or security. The assignment is a written report of no more 5,000 words (excluding tables, figures and references) based on the assignment task from one of the practical sessions. The report is to be completed as a group assignment, using the groups that students form for the tutorials. There will be no more than three people in each group. The group component accounts for 60% of the total mark.

Reading and References

• Campbell, Lo and Mackinlay (1996), The Econometrics of Financial Markets, Princeton University Press.

• Cuthbertson and Nitzsche (2004), Quantitative Financial Economics, John Wiley and Sons.