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MØLBA3005 Financial modelling

    • Number of credits
      7,5
    • Teaching semester
      2024 Autumn
    • Language of instruction
      English
    • Campus
      Lillehammer
    • Required prerequisite knowledge

      Prerequisites: LMØS120 Management Accounting and Control (Økonomisk styring og kontroll). Recommended prerequisites: LDBA200 Applied Programming (Anvendt programmering) and MØLBA3004 Business Forecasting (Prognosemodeller for økonomi og finans).

Course content
  • Portfolio theory and risk diversification
  • Empirical tests of Efficient Market Hypothesis (EMH) and CAPM
  • Capital Structures: type of financing and optimal financial mix
  • Valuation: principles and practice
  • Forwards, futures, and options
  • Modelling volatility and correlation:
    • implied volatility
    • realized volatility and correlation
    • volatility forecasting (ARCH, GARCH, HAR-RV, quantile regression)

Learning Outcome

Knowledge

The student

  • Have advanced knowledge about the characteristics of a good risk and return
  • model (k1)
  • Explain and compare models for measuring market risk and return (k2)
  • Have specialized knowledge about the principles of portfolio management (k3)
  • Have in-depth knowledge about various debt, equity, and hybrid financing options
  • available to firms (k4)
  • Explain how the main financial risk management instruments work (k5)
  • Demonstrate key concepts of the term structure of interest rates (k6)
Skills

The student can

  • Use simulations to model unknown multi-variate distributions (f1)
  • Measure the risk of portfolios using a number of different approaches/measures (f2)
  • Value a firm and its equity using different valuation methods (f3)
  • Manage financial risk (f4)
  • Price futures, options, and other derivatives in accordance with the no-arbitrage principle (f5)
  • Apply Monte Carlo simulation to compute option prices (f6)
  • Implement trading strategies (f7)
  • Demonstrate appropriate numeracy skills by doing applied research (f8)
General competence

The student can

  • Advise and assist firms in their financing decision (g1)
  • Compose plans for funding and strategies for firms (g2)
  • Assess, evaluate and apply the key features of different derivative/risk management instruments (g3)T
Teaching and working methods

The following teaching methods are used:

  • Lectures
  • Exercise sessions
  • Tutorial videos
  • Case studies
  • Quizzez
Required coursework
  • Mandatory homework assignments must be handed in before each teaching module (a total of 4). These will be combinations of practical and theoretical exercises covering key topics in the course.
  • Three out of four homework assignments must be passed to be allowed to take the exam.
  • Attendance on at least 50% of the courses lectured teaching.
Form of assessment

Four-hour individual digital exam under attendance involving elements from all modules of the course. Graded A-F, where E is minimum for passing the exam.

Assessments
Form of assessmentGrading scaleGroupingDuration of assessmentSupport materialsProportionComment
Written examination with invigilation
ECTS - A-F
Individual
4 Hour(s)
  • Approved calculator
100

Reading list

Faculty
Inland School of Business and Social Sciences
Department
Department of Business Administration