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MSc Quantitative Financial Economics
Compulsory Study (160 credits)
Students must study the following modules for 160 credits:
ECONOMIC CONCEPTS
ECO-M019
20 credits
This module is designed to introduce students to micro and macro economics analysis, and
to familiarise students with a wide range of economic tools which can be applied to issues
relating to their Applied Training Programme.
FINANCIAL ECONOMETRICS
ECO-M017
20 credits
This is a module of two halves. The first half introduces some basic econometric techniques,
and the problems which arise in their use. The second half applies the skills acquired in the
first half, to particular problems in financial economics such as the capital asset pricing
model, exchange rate forecasting, testing the efficient markets hypothesis, modelling nonconstant volatility and estimation of VAR models; Granger-causality testing, and option
valuation. With the aid of the specialist econometric software package STATA, theoretical
models are estimated and tested using real data.
FINANCIAL MARKETS
ECO-M021
20 credits
This module provides an introduction to the economics of financial markets. Financial
economics is a technical module that involves the study of financial models that can model
some part of the micro- or macro-economy. The module takes as its starting point that a
crucial part in conducting such modelling accurately is that markets are efficient. The first
part of the module introduces some key concepts, before immediately investigating the key
question of whether markets are efficient: the Efficient Markets Hypothesis. The module then
proceeds to cover the theory of consumer choice before proceeding to analyse various key
models. The other key concept covered early in the module concerns the various ways risk
can be measured including VaR and variance of return. Having provided a comprehensive
analysis of these key concepts, the remainder of the module proceeds to cover meanvariance portfolio theory, single and multi-factor models of asset returns, the Capital Asset
Pricing Model (CAPM), the Arbitrage Pricing Theory Model (APT). As well as focusing on the
theory of these standard asset pricing models, students will learn how to conduct and
evaluate statistical tests of these models. In the process students learn how economic
theories are formulated and empirically tested. The module is suitable for those interested in
a career within the financial sector or those interested in further study in financial economics.
INTERNATIONAL FINANCE
ECO-M024
20 credits
This module comprises two sections. The first section examines finance from an investor’s
perspective, highlighting aspects of portfolio diversification, asset pricing and the use of
derivatives in financial markets. In the second section, we focus on corporate finance,
examining corporate governance issues, how operations are funded (capital structure), and
how firms return money to shareholders (payout policy). Particular emphasis is placed on
the ability of students to synthesise empirical evidence from a variety of sources.
ECONOMICS DISSERTATION
ECO-M10X
60 credits
All students taking PGT degrees in the School of Economics are required to submit a
dissertation. This module prepares students to write a dissertation of a length and technical
complexity as specified in their Course Guide, on a topic approved by the Course Director or
other authorised person. The topic is not restricted, but students are expected to
demonstrate the appropriated level of course specific learning. The module also includes
training in specialist research methods and techniques; and in dissertation writing skills
through intensive workshops in the early spring. This is followed by topic specific
supervision by a dedicated (allocated) member of the teaching faculty.
RISK MANAGEMENT AND TRADING
ECO-M034
20 credits
The module introduces and analyses the major risks faced by modern financial institutions,
demonstrating how financial institutions and traders measure and manage Market and Credit
risk. The module begins by reviewing concepts of asset pricing and equilibrium in financial
markets. These concepts lay the foundation for specialisation in fixed-income portfolio
management and financial derivatives. The dominant theme of the last two decades has
been Value-at-Risk; this module discusses the methodology, its strengths, its limitations, and
its application in the area of Market Risk. We introduce techniques designed to measure
Credit risk --- those losses arising from counterparty defaults. The module concludes by
discussing trader behaviour, and its contribution to bubbles, crashes, and endogenous risk.
Option A Study (20 credits)
Students will select 20 credits from the following modules:
Students may select alternative modules from other schools with the approval of the
Postgraduate Teaching Director.
APPLIED ECONOMETRICS
ECO-M002
20 credits
This module builds on the econometric theory of earlier modules: ECO-M001, ECO-M017
and ECO-M003. It attempts to place the theoretical ideas of those modules in the context of
current applied analysis. The module is divided into five main parts: review of the CLRM and
the GM assumptions; time series econometrics, estimation of systems of equations,
microeconometrics, and panel data models. There is an emphasis on the practical
application of common estimation techniques, with the specialist econometric software
package STATA being used extensively. These skills are assessed in an applied project at
the end of the module.
FINANCIAL MATHEMATICS
ECO-M022
20 credits
This is a technical finance unit aimed at students wishing to pursue careers in the financial
sector. The focus will be on valuation and risk analysis of financial products and positions.
The unit will be highly analytical, with weekly exercises and assessment balancing
mathematical problems and practical exercises involving Excel. Topics covered will include:
present value calculation; bond analysis; futures markets; interest rate futures and yield
curve analysis; option pricing and hedging; exotic options; "Value at Risk" analysis and
Monte-Carlo methods.
MONEY AND BANKING
ECO-M036
20 credits
This is a module on the economics of money, banking and the financial markets. It provides
an overview of the global financial system with an emphasis on recent challenges. There are
three main components of the course. First, the role of financial markets in the economy will
be considered with a particular emphasis on bond markets and interest rate determination.
The course will then cover the main aspects of banks and other financial institutions before
turning to an investigation of the role of money, central banking and monetary policy. This
module also aims at introducing students to the basic theoretical concepts and applied
debates of international macroeconomics with special reference to: the effects of
international economic relations on macroeconomic performance and policies; the causes of
international financial crises; intertemporal models of the open economy.