ECO-402  FINANCIAL ECONOMICS



Introduction to Financial Economics; Scope and Subject matter of the financial economics; Real Assets versus Financial Assets; The Role of Financial Assets in the Economy; Users of the Financial System; Types of Financial Instruments; Characteristics of Financial Instruments; Financial Innovation; Theories of Term Structure — The Expectations Hypothesis, Liquidity Preference, Market Segmentation Theory, Preferred Habitat Theory, Interpreting the term structure, Measuring the term structure; Defining options and futures; Understand rights and obligations of the parties involved in various types of options; Familiarity with the basic taxonomy used in options analysis; Types of Markets; Types of Traders; The Trading Process; Defining Financial Intermediation; Different Types of Financial Intermediaries; The Role of Banks in Financial Intermediation; Moral Hazard; Adverse Selection ;Solutions ; Defining Capital Structure; Modigliani and Miller Propositions I and II; How taxes affect financing choices; Dividend policy issues; The Regulatory Role of the Government; How the Legal Environment Affects Access to External Finance; How the Legal Environment Affects Financial Decisions.

Recommended Books:


Charles P. Jones, Investments latest Edition 

Bodie, Kane and Marcus, Investments 5th Edition. 

Grinblatt and Titman, Financial Markets and Corporate Strategy, 2nd Edition. 

Cecchetti, Money, Banking and Financial markets. 

Elton and Gruber, Modern Portfolio Theory and Investment Analysis, Latest Edition. 


Bebczuk, R. N. (2003) Asymmetric Information in Financial Markets: Introduction and Applications. Cambridge University Press 


Copeland, Weston and Shastri (2005). Financial Theory and Corporate Policy. 4th Edition. 


Livingston, M. (1999). Money and Capital Markets. 3rd Edition (or later). 

Fredric, S. Mishikin, Financial Markets Institutions and Money. Harper Collins College Publishers, Latest Edition. 


William F. Sharpe & Gordon J., Investments5th E