Study Programmes 2015-2016
Financial Economics
Duration :
30h Th
Number of credits :
Master in economics : general (120 ECTS)5
Master in economics : general (120 ECTS)5
Master in business engineering (120 ECTS)5
Master in business engineering (120 ECTS)5
Lecturer :
Georges Hübner
Coordinator :
Georges Hübner
Language(s) of instruction :
English language
Organisation and examination :
Teaching in the second semester
Units courses prerequisite and corequisite :
Prerequisite or corequisite units are presented within each program
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 "utility function", "expected utility", "risk" and "risk premium". The notions of "risk aversion" and "risk perception" are very important. Applications are provided in the fields of asset pricing and behavioral finance. 2. Financial economics and portfolio management. Building on the previous part, the course reviews portfolio management and performance measurement frameworks and tools. In practice, the chosen framework and tools have to be consistent with the investor's preferences. A) Sharpe's portfolio optimization model based on the maximization of expected utility is studied. B) Besides, another portfolio optimization approach, the Black-Litterman Model which builds on Markowitz's (mean-variance) Modern Portfolio Theory and integrates the investor's market anticipations (about asset expected returns), is also analyzed. 3. Arbitrage Pricing Theory and mutual fund performance. A) APT has contributed to the development of other asset pricing models, the Factor models which are also addressed within this course (for example, the Fama-French 3-Factor Model). B) Moreover, performance measures for investment funds are also analyzed with a focus on the measurement of the manager's market-timing skills with the Treynor-Mazuy Model and some improvements to the model.  4. State prices and the pricing of contingent claims. We review the notions of state pricing, risk-neutral probabilities, stochastic discount factor, and we address applications in the fields of market completeness, interest rate modeling and the pricing of interest rate instruments and derivatives. The applications feature the development and parameterization of term structure binomial lattice models and 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 (Basel 3, Comprehensive Assessment,...).
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
Prerequisite knowledge and skills :
An introductory course in Financial Markets
Planned learning activities and teaching methods :
· For each topic (4x): 2h15 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, reading, understanding and analysis of data and scientific information, for (see hereunder):
o Group work, 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 groups) and group discussions
  • 2 presentations (+-1h-1h30 each) per group 
1 practical assignment per group
Exercise sessions (data research/collection, follow-up, Q&A for the preparation of presentations and practical assignments, group work)
2 x 3 hours of conferences with senior finance executives
Homework and group work (Course study, preparation of presentations and practical assignments)
Recommended or required readings :
PowerPoint presentations (available on the university's website lol@)
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 the university's website lol@)
Assessment methods and criteria :
A) Oral exam (50% of the final mark)
B) Group work (50% of the final mark):
- Analysis and presentation of a theoretical academic paper / book chapter about a theoretical topic
- Analysis and presentation of an academic paper about a practical topic
- Practical assignment linked to one presented topic
- Active participation in class (individual)
Relative weighting of individual assessment: 50% (+ participation)
Work placement(s) :
Organizational remarks :
Contacts :
Georges Hübner
N1, Office 111
Teaching Assistant:
Thomas Bonesire
N1, Office 111