ECON6008 (EC61A), ECON6030 (EC65A) Darron Thomas (876)512-3410 SAMB - Room 10 Mon 3-5pm, Wed 1-3pm, by Appt

ECON6038 : Financial Economics I

Course Description This is the first course in the sequence of two graduate level financial economic courses offered by the department of economics. The course consists of three components namely,class lectures, student presentations and a paper. The first part of the courses comprises of class lectures wherein material on selected topics will be covered. In the second part of the course each student will have to summarize and present three to four articles from the required reading list. The theoretical part of this course though informative is intentionally kept light to enable students to write their paper in the area of financial economics that they will have to submit to a journal for publication. Students can select a topic of their choice and have my opinion on data, methodology, estimation algorithm and techniques. I can also help selecting a topic but it might be tougher than what students might choose themselves which may require a lot of work. The paper will be presented in class for which I will have the schedule ready in due course. At the end of this course students should be able to read and understand articles published in economic journals.  PRE-REQUISITES: Knowledge of basic econometrics (EC65A and EC65B) will be assumed.  NOTE: I reserve the right to change the course outline, or the sequence of presentations without notice.   Reading List 1. The required text for the course is "Options, Futures and Other Derivatives, Sixth       Edition", 2006, John C. Hull.  2. Additional reading from “Introduction of Mathematics of Financial Derivatives”, 1996,      Neftci, S.  3. Selected topics from “Monetary Theory and Policy”, Second Edition, Carl E. Walsh.  4. Required Lists of Journal Articles  5. Suggested List of Journal Articles Course Assessment 1. Presentations of Journal articles 20 %  2. Presentation of students’ own work 30 % 3. Final examination from the material covered in class 50 % Course Outline 1. Mechanics of futures and option markets  2. Hedging using forward contracts, futures and options  3. Interest rates, term structure of interest rates and its link with money  4. Binomial and Black Scholes option pricing 5. Wiener process and Ito’s lemma  6. Greek letters and volatility smiles  7. Estimating volatilities and correlations