FM305      Half Unit
Advanced Financial Economics

This information is for the 2021/22 session.

Teacher responsible

Dr Georgy Chabakauri and Prof Dimitri Vayanos


This course is compulsory on the BSc in Finance. This course is not available as an outside option nor to General Course students.


 Students must have completed FM213 Principles of Finance.

Course content

This course will present modern theories of financial markets and asset valuation. The first part of the course will cover the principle of no arbitrage, state prices and the stochastic discount factor, utility functions and portfolio choice, and equilibrium pricing and risk-neutral pricing. The second part of the course will build on this material and develop additional tools to explore the effects of frictions in financial markets, such as asymmetric information, costs of search and market participation, leverage constraints and delegated portfolio management.


33 hours of seminars in the MT.

This course is taught in the interactive lecturing format. There is no distinction between lectures and classes/seminars; there are “sessions” only, and the pedagogical approach in each session is interactive.

Indicative reading

Teaching notes will be provided. 


Continuous assessment (100%) in the MT.

Course selection videos

Some departments have produced short videos to introduce their courses. Please refer to the course selection videos index page for further information.

Important information in response to COVID-19

Please note that during 2021/22 academic year some variation to teaching and learning activities may be required to respond to changes in public health advice and/or to account for the differing needs of students in attendance on campus and those who might be studying online. For example, this may involve changes to the mode of teaching delivery and/or the format or weighting of assessments. Changes will only be made if required and students will be notified about any changes to teaching or assessment plans at the earliest opportunity.

Key facts

Department: Finance

Total students 2020/21: 47

Average class size 2020/21: 45

Capped 2020/21: No

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Problem solving
  • Application of information skills
  • Application of numeracy skills
  • Commercial awareness