Financial Economics

Acquiring knowledge and skills in making optimal investment decisions using the principles of economic theory, primarily macroeconomics, in risk conditions. In doing so, students will focus on the essential understanding of the most important elements of modern finance theory.

The subject content is directed toward the realization Harry Markowitz's achievements about the problem of optimal choice of financial portfolios, theory of balance of financial markets and other theories.

Axioms of rational choice and utility function and balance of perfect competition; Pareto (social) optimum; The balance of the financial market without risk; Application of the concept of the time value of money; Arrow-Debreu securities and the balance in the model of static financial markets at risk; The balance on the financial market of complex securities; Expected utility function; Measures of risk aversion; The optimal choice of the portfolio; Markowitz analysis; Basic concepts of equilibrium theory CAPM; Calculation of CAPM; Application of CAPM.

Lectures and exercises, as well as case studies.

Colloquium I (0-20 points); Colloquium II (0-20 points); Final exam (0-50 points); Attendance (2point); Class activities (seminar papers, discussions, case studies) (0-8 points)

Urošević, B. (2008). Financial Economics. Belgrade: Faculty of Economics.