Financial Economics - MSc

The main aim of this module is to provide students with knowledge of core macroeconomic theory at the graduate level. The focus is on learning theoretical concepts and analytical techniques as an aid to understanding complex contemporary macroeconomic problems. In addition, the module will develop the toolbox essential for understanding all other macro-related modules in the programmes of students' further choice. The module is organized in three key parts. The first part deals with microeconomic foundations of macroeconomics and introduces rational expectations. The second part analyses short-term fluctuations in macroeconomic performance and how macroeconomic policy may be used to address these. Specifically, it provides rigorous treatment of the Real Business Cycle theory and monetary/fiscal policy as regulatory instruments. The third part deals with economic growth as a fundamental determinant of long-term macroeconomic performance.

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This module is designed to introduce to the main theoretical and empirical models of international financial relations. Exchange rates, capital flows, financial crises, current account and debt dynamics as well as uncertainty are the most widely debated economic topics in the media and on the political arena. This module provides the economic foundations for full understanding of these debates from a rigorous point of view. The module is evenly balanced between the theory and empirical evidence. That is, we focus not only on the analytical side of the stories but also on their empirical relevance.

For working in the areas of financial economics and development (whether in private or public institutions) the knowledge of the topics addressed in this module is of paramount importance.

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This module studies basic econometric techniques. An intuitive and practical learning style will be used in order to develop participants understanding and ability to apply these econometric methods. Participants will develop an understanding of the conventional linear regression model in cross section, time series and panel data. The module focuses on the application of econometric methods, with little emphasis on the mathematical aspects of the subject. A computer software package will be used for practical work throughout this module, both as a means to provide applications of the theory developed in lectures as well as to give experience in the use of such software for participants own empirical research. No previous knowledge of computing or econometrics is required.

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This is a classical module on foundations of advanced financial economics. Emphasizing both analytical techniques and practical knowledge it introduces key economic principles around which financial markets are built worldwide. The module offers an in-depth analytical treatment of pricing techniques, optimal investment strategies and portfolio management solutions, accompanied by quantification of related key financial measures. The module provides a solid platform for understanding, interpreting and developing analytical models of the dynamics of financial markets and making informed decisions on their basis. It is central to students who see their future careers among financial market actors as well as at national or international institutions that oversee and regulate financial market activity.

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The aim of this module is to study the theoretical foundations of the contemporary financial economics practice. The module consists of two main parts. In the first part, starting with the brief introduction to the probability theory and the stochastic calculus, we study the martingale asset pricing, which is a revolutionary idea in the derivative pricing. Because financial derivatives are often convoluted, it is difficult to evaluate their risk-premium explicitly. What is surprising in the martingale asset pricing is that it tells how to construct a hypothetical (but theoretically consistent) probability density, under which there is no risk-premium explicitly on any derivative prices. It rather takes into account the risk-premium implicitly by modifying the probability density. The other key issues we study include the Feynman-Kac stochastic representation and some practically important stochastic processes. In the second part, we study real options, which quite often arise in actual business scenes and real life. The examples of real options range from large scale capital investments to suicide. It turns out that when a decision is irreversible and the future is uncertain, the value of information is a homomorphism to financial options. As an informal prerequisite, the students are expected to be familiar with the reality of the actual financial markets, while they are not required more than high-school level math. The module emphasises the intuitions rather than rigorous math and offers some heuristics when they are useful.

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Money and credit perform a range of crucial functions in market economies. This module studies the microeconomic foundations of money and credit, and the roles played by money and credit markets in contributing to macroeconomic growth, fluctuations and crises. Throughout the module, we also consider the roles of government institutions including central banks and financial regulators within modern markets for money and credit. The module makes use of theoretical models to aide understanding and analyse policy. These models are motivated by and tested against historical and contemporary evidence. .. We explore and compare a variety of frameworks for organising monetary policy and the particular challenges facing modern central banks in how they implement monetary policy today. We understand the microeconomic foundations of banking and how these should influence financial regulation, examining the linkages between the private banking sector, central banks and monetary policy throughout the module.

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The module consists of preparation of the 1-page dissertation proposal to be submitted by the end of Week 13. Upon review of the proposal by the Director of Graduate Studies the student is allocated to the supervisor. For the rest of the term the student and the supervisor meet and discuss in details the proposal to identify the relevant literature research methods and actions. By the end of Week 24 the student submits an additional 1-page outline of the dissertation with the exact research question, relevant methodological toolbox to address the question and reference to the relevant data (if applicable). The outline is further supported by the condensed list of the core literature.

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This module helps prepare students to acquire and develop the employability and transferable skills necessary to search and successfully apply for work experience and graduate opportunities in the commercial and public sector and for PhD programmes.

The curriculum will include guidance and practical exercises in application writing, CVs, careers advice, interview and assessment centre techniques, numeracy and competency tests, and psychometric evaluation.

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This module is designed for students with interests in both international economics and development economics. It aims to discuss some of the fundamental models (and their extensions) in international economics and link them to the growth and development process of regions and countries. Throughout this module we provide you with the analytical tools and theoretical knowledge necessary to understand these links. We also focus on both the theoretical foundations and extensions of trade theory and the empirical evidence available to the current theoretical debates. The first part of the module is devoted to the foundations of trade theory and it is the basic building block of the module. The rest of the module deals with trade policy, trade liberalisation and long run growth, factor movements as well as economic geography and regional trade agreements and their implication for global free trade.

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The module offers a research-oriented introduction to contemporary macro and financial econometrics by linking econometric theory to empirical studies of the macro-economy and financial markets. It introduces models and methods used in central banks and research institutions for policy analysis and forecasting the macroeconomy as well as those used by financial institutions for low-frequency trading, risk assessment and portfolio allocation. It integrates empirical illustrations through the use of computer-based analysis of macroeconomic and financial data using appropriate software. We commence by with providing a comprehensive introduction to stationary and nonstationary stochastic processes as well as the methods and models of univariate time series. We then proceed with modelling and predicting asset prices and returns and their volatility. Finally, we introduce multiple time series techniques for policy analysis and for macro-finance models.

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The module offers rigorous treatment of advanced methods in modern financial econometrics. Giving equal attention to theory and empirical practice it provides students with essential knowledge indispensable for financial market professionals working in analytics departments. The module starts with the overview of core concepts of time series analysis. It proceeds with specifying, estimating and testing a range of asset pricing models including Stochastic Discount Factor Based Asset Pricing, The Capital Asset Pricing Model, and Factor Pricing Regressions. Next, the module addresses the analysis of returns predictability, both in the single regression framework and in the multivariate setting. Here we also provide careful modelling of volatility effects of the market data (e.g. by using asymmetric GARCH), and market interdependence. Special attention is paid to small sample biases and identification issues.

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The dissertation work is carefully structured across the whole academic year. On entry to the MSc programmes, students are made aware of the need to consider their dissertation during the taught part of the programme and to do some preparatory work in terms of selection of research topic and investigation of the availability of data before the beginning of the dissertation working period. They receive guidelines on the writing of economics dissertations and they receive various talks and advice above the researching and writing of their dissertation. Students are allocated an appropriate member of staff as dissertation supervisor.

Students of MSc Development Economics may opt for a co-delivery arrangement with Brac University, Bangladesh, or North South University, Bangladesh, in which they are hosted by Brac / North South and jointly supervised by academic staff members from Kent and Brac / North South University (one supervisor from each institution).

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