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Principles of Finance

This course is the introductory course for all finance specializations (Kernfachkombinationen): Corporate Finance, Financial Institutions, Financial Markets and Financial Services (Finanzdienstleistungen)  for the Master Programs Business Administration and International Business Administration (Curriculum 2006).

It is recognised as

  • Basics in Finance (4 ECTS)
    and
  • Asset Pricing 1 (4 ECTS)

within the Minor Banking and Finance (Curriculum 2016).

The course is an introduction into the basics of financial markets on a graduate level. It covers individual decisions under uncertainty, optimal  portfolio choice and optimal hedging against risk with the help of financial instruments such as derivatives (options, futures, swaps etc.). It also covers the pricing of financial securities in competitive markets, both under conditions of symmetric information across market participants and under conditions of asymmetric information.

It is held 4 hours per week, every term. It is held in English and all examinations are in English. In the summer term 2017 it will be held for the last time.

Prerequisites

Besides intermediate knowledge in finance (at the level of the Bachelor courses such as Introduction to Finance and Intermediate Finance (EK+VK ABWL Finanzwirtschaft)), a good knowledge in microeconomics is required. In particular, students need to possess a basic knowledge of financial markets and market equilibrium as well as basic knowledge in decision theory, methods of optimization under constraints (in particular method of Lagrange) and linear algebra.

Given that financial assets are characterized as random variables, basic prior knowledge in statistics and probability theory is indispensable. Knowledge of econometrics may be useful for applying and testing financial theories on real world data.

Contents

  1. Introduction
    • On the Role of Financial Markets and Institutions,
      Key Ideas in Financial Economics
    • Financial Decisions and the Theory of Choice
      (intertemporal transfer of funds, hedging risk and demand for insurance)
  2. Decisions under Uncertainty
  3. Portfolio Choice: mean-variance approach
  4. Asset Pricing
    • State preference model
    • Arbitrage pricing
    • Market equilibrium
  5. Dynamic Asset Pricing
  6. Risk and Information
  7. Asymmetric Information on Financial Markets

Schedule and Topics

see websites of the lecturers:

winter term: Prof. Gaunersdorfer
summer term: Prof. Gehrig

Literature

Further reading:

  • Copeland, T. E., J. F. Weston, K. Shastri, Financial Theory and Corporate Policy (4th ed.), Pearson Education, 2005

  • Hull, J. C., Options, Futures, and Other Derivative Securities, Prentice Hall, 6th ed., 2005.

Additional literature is given in the course.

Introduction into econometrics:

Recommended text books in microeconomics:

  • Varian, H. R., Intermediate Microeconomics (5th ed.), W.W. Norton & Company, New York, 1999.

  • Mas-Colell, A., M. D. Whinston, J. R. Green, Microeconomic Theory, Oxford University Press, New York, 1995.

Archive

Institut für Finanzwirtschaft
Fakultät für Wirtschaftswissenschaften
Universität Wien

Oskar-Morgenstern-Platz 1
1090 Wien
T: +43-1-4277-38262
F: +43-1-4277-838262
Universität Wien | Universitätsring 1 | 1010 Wien | T +43-1-4277-0