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Study information

Financial Markets and Decisions 2

Module titleFinancial Markets and Decisions 2
Module codeBEE3034
Academic year2024/5
Credits15
Module staff

Dr Samuel Odewunmi (Convenor)

Duration: Term123
Duration: Weeks

11

Number students taking module (anticipated)

190

Module description

The pair of modules BEE2027 and BEE3034 present the theory of decision-making under risk and the economics of information, discussing applications of the theory in the areas of banking and finance. The topics covered include expected utility theory, adverse selection, moral hazard, the Modigliani-Miller theorems and the incentive effects of debt and equity.

Additional Information:

Internationalisation

The module content is globally relevant as it theoretically discusses financial markets, international trends in corporate finance and governance, and comparative studies through up-to-date research.

Employability

Students acquire several skills valued by employers, including a theoretical knowledge and understanding of financial markets, the application of theory, the ability to think like an economist, and designing firm level policies.

 

Module aims - intentions of the module

The module presents the theory of decision-making under risk and the economics of information and to discuss applications of the theory in the areas of banking and financial markets. The topics covered include expected utility theory, adverse selection, moral hazard, the Modigliani-Miller theorems and the incentive effects of debt and equity.

Intended Learning Outcomes (ILOs)

ILO: Module-specific skills

On successfully completing the module you will be able to...

  • 1. Understand key concepts of decision-making under uncertainty, the impact of uncertainty on firms and impact on financial markets
  • 2. Understand the choice between debt and equity financing. How financial decisions are affected by asymmetric information

ILO: Discipline-specific skills

On successfully completing the module you will be able to...

  • 3. Understand the causes and consequences of moral hazard and adverse selection in financial markets

ILO: Personal and key skills

On successfully completing the module you will be able to...

  • 4. Think analytically about financial markets and firms. Formal modelling of decisions and financial markets
  • 5. Study a range of teaching and research material and to work independently

Syllabus plan

  • Estimating the Cost of Capital (Berk and DeMarzo, Chapter 12)
  • Modigliani-Miller Theorem (Berk and DeMarzo, Chapter 14)
  • Capital Structure: Debt and Taxes (Berk and DeMarzo, Chapter 15)
  • Capital Structure: Agency Problems (Berk and DeMarzo, Chapter 16)
  • Capital Structure: Payout Policy (Berk and DeMarzo, Chapter 17)
  • Valuation and WACC (Berk and DeMarzo, Chapters 18 to 19)

Learning activities and teaching methods (given in hours of study time)

Scheduled Learning and Teaching ActivitiesGuided independent studyPlacement / study abroad
251250

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Scheduled learning and teaching activity20Lectures
Scheduled learning and teaching activity5Seminars
Guided independent study125Reading, research and reflection. Preparation for exam and midterm

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
A problem set for each topic and a revision sheet after all topics are completed11-5Written and verbal feedback after students have had the chance of going through the problem sheets on their own

Summative assessment (% of credit)

CourseworkWritten examsPractical exams
20800

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Examination802 hours1-5Notes on solutions and guidance on ELE
Midterm201 hour1-5Written

Details of re-assessment (where required by referral or deferral)

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
MidtermMidterm (1hour) (20%)1-5August/September reassessment period
ExaminationExamination (2hours) (80%)1-5August/September reassessment period

Indicative learning resources - Basic reading

Berk and DeMarzo (2020) Corporate Finance (5th Edition), Pearson Edition.

Key words search

Financial Markets, Credit Rationing, Debt-Equity Ratio, Modigliani and Miller Theorem, Asymmetric Information. 

Credit value15
Module ECTS

7.5

Module pre-requisites

BEE2027

Module co-requisites

None

NQF level (module)

6

Available as distance learning?

No

Origin date

01/09/2007

Last revision date

13/03/2023