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Students and practitioners of finance need an up to date course that aids them in gaining a deeper understanding of the modern world of finance. Accordingly this course will emphasise the learning and application of basic analytical concepts. The course assumes some background knowledge in finance and statistics. See the course pre-requisites.

Financial Economics is a course in economic theory and relevant applications for finance students. It draws upon well-established microeconomic theory, which helps to provide an understanding of the interactions between agents and markets within the global financial system. The course also develops macroeconomic theory that directly relates to the monetary and banking system. A solid foundational understanding of financial economics is critical for students to develop core competency in finance.

On successful completion of this course students should be able to:

1. synthesise knowledge, concepts, theories, and processes pertaining to the functioning of financial institutions, financial regulation, financial structure, financial risk management and the impact of economic policy on the financial system;
2. use critical thinking skills to constructively and logically solve issues, problems, and engage in theoretical debates about transaction costs, economies of scale, adverse selection, moral hazard, the principal agent problem, the term structure of interest rates and the conduct of central banks;
3. apply economic and financial knowledge and technical skills to determine the likely impacts of government policy and the interplay of demand and supply factors on key economic metrics including interest rates and inflation;
4. apply the literacy and numeracy skills required of financial services professionals, when interpreting the variety of written and graphical information to explain the rationale and impacts of financial policy and regulations, and undertake a range of calculations facing managers of financial institutions.