University of Liege | Version française
Academic year 2014-2015Value date : 27/11/2014
FINA0062-1  Financial Economics

Duration :  30h Th
Number of credits :  
Master degree in Economics, professional focus in Economics and Finance, 2nd year5
Master degree in Business Engineering, professional focus in Financial Engineering, 2nd year5
Lecturer :  Georges Hübner
Coordinator :  Georges Hübner
Language(s) of instruction :  
English language
Organisation and examination :  
Teaching in the second semester
Course contents :  
This course provides insights into the economic modeling of financial markets, institutions and instruments. The course is divided in four parts:
1. Preferences for Risk and return. This part studies the main aspects of financial risk and returns at rational expectations equilibrium and the sources of deviation from this equilibrium. A particular focus is brought on the influence of the preference structure of economic agents on the notions of "expected utility", "risk" and "risk premium". Applications are provided in the field of asset pricing.
2. Financial economics and portfolio management. Building on the previous part, the course reviews the performance management and measurement framework consistent with investor's preferences. Sharpe's portfolio optimization model based on the maximization of expected utility is studied. Besides, another portfolio optimization approach, the Black-Litterman model which integrates the investor's anticipations, is also analyzed.
3. Arbitrage pricing theory and fund performance. APT has contributed to the development of other asset pricing models, the Factor models which are also studied within this course. Moreover, performance measures for investment funds are also analyzed with a focus on the Treynor-Mazuy model and some improvements to the model.
 4. State prices and the pricing of contingent claims. We review the notion of state pricing and the applications in the fields of market completeness and interest rate modeling. The application features the development and parameterization of term structure models such as the Black-Derman-Toy model.
Finally, the course prioritizes contacts with market professionals as selected guests intervene during some sessions on topics such as the valuation of options (notion of smiles,...) and the banking and financial regulation.
Learning outcomes of the course :  
The course pursues the following objectives:
1. To endow students with the basic insight regarding the formation of financial prices at equilibrium and the deviations thereof.
2. To provide students with the body of knowledge necessary to understand the interactions between financial markets participants and regulators.
3. To train students to the application of well-known theories and to the resolution of pracical problems (portfolio optimization, risk and performance management, modelization of interest-rates and asset valuation to fixed-income portfolio management, and to the analysis of academic papers.
4. To confront students with real issues through the experience of high-level market practitioners. Intended Learning Outcomes addressed by the course :
  • Gaining the knowledge and understanding of one of the following fields: supply chain management, financial engineering, performance management systems or intrapreneuriat; being able to mobilize them in order to solve concrete management problems or cases
  • Ability to speak 2 foreign languages: C1 in English and B2 in one other language
  • Capacity to research autonomously and methodically the information needed to solve a complex, transversal management problem, to perform a rigorous analysis of it and to suggest pertinent solutions
  • Understanding and being capable of using modelization methods when seeking a solution for a concrete management problem
  • Being capable of professional team work
  • Professional capacity for oral communication
Prerequisites and co-requisites/ Recommended optional programme components :  
An introductory course in Financial Markets
Planned learning activities and teaching methods :  
· For each topic (4x): 2h30 Theory, 3h student presentations on theoretical and practical aspects (by groups)
· Exercise sessions in the trading room, featuring:
o The appropriation of a financial database platform (Telekurs)
o The research and analysis of data and scientific information, for:
- The preparation of presentations
- The resolution of practical assignments
Mode of delivery (face-to-face ; distance-learning) :  
9 hours of ex-cathedra lectures
12 hours of students' presentations (by teams) and group discussions   Exercise sessions (data research/collection, follow-up, Q&A for the preparation of presentations and practical assignments)
2 x 2 hours of conferences with senior finance executives
Recommended or required readings :  
PowerPoint presentations (available on university's website).
While building mainly on
- Mishkin, F. "The Economics of Money, Banking and Financial Markets" (Pearson Educ., Global edition, 10th Edition, 2013)
- Fabozzi, F., Neave, E. H. and Zhou, G. "Financial Economics" (Wiley, 2012)
Academic papers (available on university's website)
Assessment methods and criteria :  
- Oral exam (50% of the final mark)
- Collective work (50% of the final mark):
Presentation/analysis of an academic paper/book chapter about a theoretical topic
Presentation/analysis of an academic paper about a practical topic
Practical assignment linked to one presented topic
Relative weighting of individual assessment : 50%
Work placement(s) :  
Organizational remarks :  
Contacts :  
Georges Hübner
N1, Office 111
g.hubner@ulg.ac.be
04/2327428
Teaching Assistant:
Thomas Bonesire
N1, Office 111
thomas.bonesire@ulg.ac.be
04/2327428



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