3506576: Financial Decision Making

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Semester:SS 13
Scheduled in semester:4
Semester Hours per Week / Contact Hours:60.0 L / 45.0 h
Self-directed study time:135.0 h

Module coordination/Lecturers


Bachelor's degree programme in Business Administration (01.09.2012)


Decision Theory: Expected utility theory und mean-variance theory & prospect theory.

Game Theory: Strategic Form Games: Dominant strategies and solvability, Nash equilibrium, mixed strategies, zero sum games, extensive form games, dynamic, static and repeated games. Rationality and games with incomplete information

Behavioral Finance: Comparison of empirical observations and decision theory. Behavioral biases & risk profiling,
gathering, processing and using information on experimental financial markets


    • Know the most prominent decision and game theories. They are aware of the important human biases in financial decision making.
    • Understand how rational solutions can be found by applying classical decision models and are aware of the differences between these model solutions and the solutions humans normally come up with.
    • Solve decision problems by using DT and GT models and methods. They find the strategic aspect of a problem and write it down into a simplified game/problem. They are able to use concepts and methods to solve those games and can predict the behavior of involved players.
    • Analyze games and decision situations and decide which approaches are useful to handle them.
    • Combine the knowledge from various areas to create a risk profiler for a better understanding of clients` needs.
    • Evaluate of Investments with EUT, MVT and PT.
    • Know methods in game and decision theory.
    • Explain and interpret the assumptions of these methods.
    • Use methods and models on unknown decision situations. Calculate optimal solutions and equilibria.
    • Compare different methods for measuring and controlling risk and uncertainty in decision processes.
    • Evaluate decision methods in mini cases and find appropriate models for solving typical problems.
    • Understand and critically discuss the arguments of fellow students.
    • Work together in small groups to solve mini cases and small examples discussed in class.
    • Evaluate the solutions of fellow students, explain carefully why they might be seen as right or wrong.
    • Understand the flaws and problems of fellow students, reaction without offense.
    • React to and defend their solution without being offended.
    • Listen carefully, read and repeat, practice until they understand the logic and mathematics the models are based upon.
    • Work together and motivate other students who tend to give up as a reaction to the difficulty of mathematical problems.
    • Take responsibility and organize/explain solutions to others who have problems and tend to give up.

Admission Requirements

Knowledge prerequisites:

Modul Mikroökonomie

  • Preferences and Utility
  • Decisions under risk and uncertainty


The following conditions need to be met prior to registering for the module:

  • successful completion of English I
  • successful completion of additional first year programme modules amounting to at least 45 credit points.

Exception for SS 13: only 39 additional credits.