ECO5936 Applied Financial Economics (MS in Applied Economics Program)

Course Description

This course is restricted to students in the MS in Applied Economics Program. The course provides a basic introduction to financial markets for bonds, equities and derivatives and examines and how these financial markets interact with the goods markets of an economy. The course is data oriented and will incorporate many of the methods that you will be learning concurrently in the ECO5434 Analysis of Economic Data class. Topics include: decision-making under uncertainty; the term structure of interest rates; optimal portfolio selection; asset valuation models; derivative assets such as forwards, futures, swaps and options; and how the Federal Reserve Bank uses financial markets to forecast the real growth of the economy.

Learning Objectives

At the completion of this course, students will be able to:

1. describe decision-making under uncertainty;
2. describe the key elements of Modern Portfolio Theory including portfolio selection and asset pricing models;
3. describe recent extentions of MPT including dynamic pricing, arbitrage theory, and dealing with market inefficiencies;
4. describe specific financial markets including equities, bonds, the term structure of interest rates, forwards, futures, swaps, and options;
5. describe recent financial innovations such as crypto markets, decentralized financing, NFTs, SPACs, and payment for order flow.