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5008073: C15 Financial Economics and Markets

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Semester:WS 20/21
Scheduled in semester:1
Semester Hours per Week / Contact Hours:49.0 L / 37.0 h
Self-directed study time:143.0 h

Module coordination/Lecturers


Master's degree programme in Finance (01.09.2015)


  • Introduction to Financial Markets
  • Interest rates and bond prices
  • The structure of interest rates
  • Market efficiency
  • Monetary policy
  • Money markets
  • Bond markets
  • Mortgage markets
  • Derivative markets
  • Introduction to Financial Economics
  • Expected utility, Mean-variance and Prospect theory
  • Ambiguity
  • Capital Asset Pricing Model
  • Behavioral CAPM
  • Basic two-period models
  • Arbitrage Pricing Theory

Lecture Goals

After the completion of the module the students know how the most important financial markets work and which instruments are traded on them. They know and are able to use in examples the groundwork of decision theory and asset pricing models. An insight into behavioral aspects is approached.

Learning Outcomes

> know how interest rates and bond prices are related and influence each other
> know different structures and theories of interest rates
> are able to explain what market efficiency is and know evidence for different stages
> can explain how monetary policy is used to influence financial markets
> know the dynamics of money, bond, derivatives and mortgage markets
> are able to use all classic decision theories to solve exemplary problems
> know the assumptions underlying each decision model
> understand what ambiguity is and how it influences decisions
> understand and are able to use different pricing models on basic exemplary problems


Lectures Method

Interactive lecture with compulsory pre-readings.


  • LeRoy, S. F., & Werner, J. (2014). Principles of financial economics (2nd ed.). Cambridge: Cambridge University Press
  • Brealey, R., Myers, S., and Allen, F. (2011). Principles of corporate finance (10th ed.). New York, NY: McGraw Hill

Exam Modalities

See lecture within the module.