This course examines the economic principles that determine the allocation of resources through time in market economies. It uses supply and demand relationships to value capital assets (or projects more generally). There is a detailed treatment of the effects of risk and taxes on capital asset prices, and the Modigliani-Miller financial policy irrelevance theorems are derived and examined in detail. The impact of modern contracting theory on our understanding of financial economics will also be discussed.

Learning Outcomes

Upon successful completion, students will have the knowledge and skills to:

1. be exposed to the classical finance model that underpins modern finance;
2. understand how securities are priced and affected by the institutional arrangements in securities markets, including taxes and other government regulations,
3. understand the role played by time, uncertainty, information and inflation in evaluating financial instruments;
4. know the role played by arbitrage in finance markets and its impact on security prices;
5. understand how security prices are determined in the Capital Asset Pricing Model, and the role played by the assumptions in the model;
6. know the assumptions behind the the Modigliani and Miller (M-M) financial policy irrelevance theorems as basis for understanding the factors that determine the debt-equity and dividend policy choices of firms.
7. understand to the role of asymmetric information in various financial markets.
8. understand how contractual incompleteness can impact corporate financial decisions.

Research-Led Teaching

This course is based on a new approach developed by Professor Meagher in consultation with industry.

Examination Material or equipment

Simple calculators.

 

The binding details for the final exam will be given in the University’s final exam timetable

http://timetable.anu.edu.au/exams/

Required Resources

The main textbook for this course is:

Fabozzi, F., E. Neave & G. Zhou, 2012, Financial Economics, Wiley.

 

The recommended, free, reference for Python is Kevin Sheppard’s notes:  https://www.kevinsheppard.com/images/b/b3/Python_introduction-2016.pdf

The book can be purchased from the on campus bookshop, with a small number of copies also available for 2 hour loan in the reserve loan section of the Chifley Library

Staff Feedback

This course will run with an engaged classroom approach so the first form of feedback will be verbal and informal through classroom participation.

You will attempt the problem sets before the tutorials and submit your answers at the beginning of the tutorial. Reflecting on how your answers compare to discussion in the tutorial will inform you on your mastery of the material. You will also receive a 0-2 grade as detailed above.

The in mid-semester exam will give course level feedback on your understanding.

Student Feedback

ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. Students are encouraged to offer feedback directly to their Course Convener or through their College and Course representatives (if applicable). The feedback given in these surveys is anonymous and provides the Colleges, University Education Committee and Academic Board with opportunities to recognise excellent teaching, and opportunities for improvement. The Surveys and Evaluation website provides more information on student surveys at ANU and reports on the feedback provided on ANU courses.

Other Information

Other information

Tutorials are a discussion-based class. Providing worked solutions would not effectively compensate for missing a tutorial. Students who, through unavoidable and unplanned occurrences, are unable to attend a tutorial class one week are encouraged to work through the problems and attend a consultation session for discussion and solutions.

RSE has a Frequently Asked Questions page where you can find relevant policies and information on a broad range of topics, the onus is on the student to familiarise themselves with this page and the information available.  https://www.rse.anu.edu.au/students/students/frequently-asked-questions/

Additional assessment information

As a further academic integrity control, students may be selected for a 15 minute individual oral examination of their written assessment submissions.

Any student identified, either during the current semester or in retrospect, as having used ghost writing services will be investigated under the University’s Academic Misconduct Rule.

Class Schedule

Week/Session	Summary of Activities	Assessment
1	The exact timing of topics will depend on student interest. The Python component will run through out the semester in conjunction with the financial economics topics. Topic: Finance in a Certain World with Perfect Capital Markets. Chapter of Text Books*: Fabozzi et al, 1-6. Topic: Computational methods for manipulating data and exploring models. Chapter of Text Books*: Sheppard, 1-19 (we will only be doing selections focusing on Pandas, graphing and basic simulation). 2 lectures	None
2	Topic: Finance in a Certain World with Perfect Capital Markets. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Tutorial problem set
3	Topic: Finance in a Certain World with Perfect Capital Markets. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Tutorial problem set
4	Topic: Finance in a Certain World with Perfect Capital Markets. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Tutorial problem set
5	Topic: Finance in a Certain World with Perfect Capital Markets. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Tutorial problem set
6	Topic: Finance in a Certain World with Perfect Capital Markets. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Mid-semester exam (provisional). See ANU mid-semester exam timetable.
7	Topic: Risk Chapter of Text Books*: Fabozzi et al, 9-12. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Tutorial problem set
8	Topic: Risk Chapter of Text Books*: Fabozzi et al, 9-12. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Tutorial problem set
9	Topic: Selecting and Pricing Risky Assets Chapter of Text Books*: Fabozzi et al, 13-14, 25-26. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Tutorial problem set
10	Topic: Selecting and Pricing Risky Assets Chapter of Text Books*: Fabozzi et al, 13-14, 25-26. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	Tutorial problem set Project due Noon on Monday.
11	Topic: Selecting and Pricing Risky Assets Chapter of Text Books*: Fabozzi et al, 13-14, 25-26. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	None
12	Topic: Selecting and Pricing Risky Assets Chapter of Text Books*: Fabozzi et al, 13-14, 25-26. Topic: Computational methods for manipulating data and exploring models. 2 lectures, 1 tutorial	None
13	Examination period

Tutorial Registration

This is a typically a small class so we will probably only have one tutorial. If we end up with a larger enrolment and multiple tutorials then any actions you need to take will be advised on the course Wattle page.

Assessment Summary

Assessment task	Value	Due Date	Return of assessment	Learning Outcomes
Tutorial problem sets	10 %	04/03/2019	31/05/2019	1-8
Mid-semester exam	25 %	01/04/2019	31/05/2019	1-4
Project	20 %	13/05/2019	31/05/2019	7-8
Final exam	45 %	01/06/2019	01/07/2019	1-8

* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details

Policies

ANU has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. Students are expected to have read the Academic Misconduct Rule before the commencement of their course. Other key policies and guidelines include:

• Student Assessment (Coursework) Policy and Procedure
• Special Assessment Consideration Policy and General Information 
• Student Surveys and Evaluations
• Deferred Examinations
• Student Complaint Resolution Policy and Procedure

Assessment Requirements

The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit the ANU Online website. Students may choose not to submit assessment items through Turnitin. In this instance you will be required to submit, alongside the assessment item itself, hard copies of all references included in the assessment item.

Moderation of Assessment

Marks that are allocated during Semester are to be considered provisional until formalised by the College examiners meeting at the end of each Semester. If appropriate, some moderation of marks might be applied prior to final results being released.

Participation

  This is an on-campus course. Attendance at all teaching events, while not compulsory, is expected in line with “Code of Practice for Teaching and Learning”, clause 2 paragraph (b).

Examination(s)

The final exam will cover material presented throughout the semester and will be held during the university examination period. For information on deferred exams see Deferred Exams

Assessment Task 1

Tutorial problem sets

Submit your answers/solutions for the appropriate week, as a pdf, before the first tutorial of that week using Turnitin (details on Wattle). Proposed method for dealing with deferred assessment for this item: the worst 2 marks awarded for the tutorial problem sets will be dropped in calculating the average (which determines the mark for this item). If a valid medical certificate or similar excuse is provided for any missed tutorial problem set(s) the assessment weight for the missed item will be transferred to the remaining tutorial problem sets. Students who are granted a deferred examination by the University for any of the problem sets will take a single replacement oral quiz in week 10.

Estimated return date on Wattle: Approximately 2 weeks after the tutorial problem sets. Feedback on the problem sets will form the basis for the tutorials.

Rubric

Mark	Criteria
2	satisfactory attempt at all problems
1	unsatisfactory attempt at some problems or incomplete attempt
0	unsatisfactory attempt or no attempt for all problems

Assessment Task 2

Mid-semester exam

All material covered prior to the exam is potentially examinable. Time, location etc. will reflect central examinations section requirements. Probably 90 minutes with no reading time.

Simple calculators are recommended.

Estimated return date: Approximately 2 teaching weeks after the exam

The arrangements for the mid-semester exam depend on enrolments for this course. Any changes and details about the mid-semester exam will be posted on Wattle.

Assessment Task 3

Project

Details of task: Read Chapters 11and 12 of "Economics for the Common Good" by Jean Tirole and write a paper of approximately 2000 words making use of formal economic theory to analyse asymmetric information and/or incomplete contracts in how financial regulation could help avoid another Global Financial Crisis.

Presentation requirements: A typed, A4, 12pt Times New Roman font version of your assignment should be submitted in soft copy through Turnitin in accordance with the university assignment submission policies described below.

Estimated return date: Approximately 2-3 weeks after submission.

Rubric

language and grammar	formal explanation of main contribution of the pap	economic intuition for main result	evaluation of strengths and weaknesses
10%	40%	25%	25%

Assessment Task 4

Final exam

The final exam will cover material presented throughout the semester and will be held during the university examination period. Probably 120 minutes with no reading time.

Academic Integrity

Academic integrity is a core part of our culture as a community of scholars. At its heart, academic integrity is about behaving ethically. This means that all members of the community commit to honest and responsible scholarly practice and to upholding these values with respect and fairness. The Australian National University commits to embedding the values of academic integrity in our teaching and learning. We ensure that all members of our community understand how to engage in academic work in ways that are consistent with, and actively support academic integrity. The ANU expects staff and students to uphold high standards of academic integrity and act ethically and honestly, to ensure the quality and value of the qualification that you will graduate with. The University has policies and procedures in place to promote academic integrity and manage academic misconduct. Visit the following Academic honesty & plagiarism website for more information about academic integrity and what the ANU considers academic misconduct. The ANU offers a number of services to assist students with their assignments, examinations, and other learning activities. The Academic Skills and Learning Centre offers a number of workshops and seminars that you may find useful for your studies.

Online Submission

You will be required to electronically sign a declaration as part of the submission of your assignment. Please keep a copy of the assignment for your records. Unless an exemption has been approved by the Associate Dean (Education) as submission must be through Turnitin.

Hardcopy Submission

For some forms of assessment (hand written assignments, art works, laboratory notes, etc.) hard copy submission is appropriate when approved by the Associate Dean (Education). Hard copy submissions must utilise the Assignment Cover Sheet. Please keep a copy of tasks completed for your records.

Late Submission

No submission of assessment tasks without an extension after the due date will be permitted. If an assessment task is not submitted by the due date, a mark of 0 will be awarded.

Late submission is not accepted for take-home examinations.

Referencing Requirements

Accepted academic practice for referencing sources that you use in presentations can be found via the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. Alternatively, you can seek help through the Students Learning Development website.

Returning Assignments

Your submitted assessment items during the semester will be returned in class. Alternative arrangements may be possible.

Extensions and Penalties

Extensions and late submission of assessment pieces are covered by the Student Assessment (Coursework) Policy and Procedure. The Course Convener may grant extensions for assessment pieces that are not examinations or take-home examinations. If you need an extension, you must request an extension in writing on or before the due date. If you have documented and appropriate medical evidence that demonstrates you were not able to request an extension on or before the due date, you may be able to request it after the due date.

Privacy Notice

The ANU has made a number of third party, online, databases available for students to use. Use of each online database is conditional on student end users first agreeing to the database licensor’s terms of service and/or privacy policy. Students should read these carefully. In some cases student end users will be required to register an account with the database licensor and submit personal information, including their: first name; last name; ANU email address; and other information.
In cases where student end users are asked to submit ‘content’ to a database, such as an assignment or short answers, the database licensor may only use the student’s ‘content’ in accordance with the terms of service – including any (copyright) licence the student grants to the database licensor. Any personal information or content a student submits may be stored by the licensor, potentially offshore, and will be used to process the database service in accordance with the licensors terms of service and/or privacy policy.
If any student chooses not to agree to the database licensor’s terms of service or privacy policy, the student will not be able to access and use the database. In these circumstances students should contact their lecturer to enquire about alternative arrangements that are available.

Distribution of grades policy

Academic Quality Assurance Committee monitors the performance of students, including attrition, further study and employment rates and grade distribution, and College reports on quality assurance processes for assessment activities, including alignment with national and international disciplinary and interdisciplinary standards, as well as qualification type learning outcomes.

Since first semester 1994, ANU uses a grading scale for all courses. This grading scale is used by all academic areas of the University.

Support for students

The University offers students support through several different services. You may contact the services listed below directly or seek advice from your Course Convener, Student Administrators, or your College and Course representatives (if applicable).

• ANU Health, safety & wellbeing for medical services, counselling, mental health and spiritual support
• ANU Diversity and inclusion for students with a disability or ongoing or chronic illness
• ANU Dean of Students for confidential, impartial advice and help to resolve problems between students and the academic or administrative areas of the University
• ANU Academic Skills and Learning Centre supports you make your own decisions about how you learn and manage your workload.
• ANU Counselling Centre promotes, supports and enhances mental health and wellbeing within the University student community.
• ANUSA supports and represents undergraduate and ANU College students
• PARSA supports and represents postgraduate and research students