Quantitative Analysis of Finance II

This subject is not offered in 2014.

Estimated total time commitment of 120 hours per semester

ECON90033 Quantitative Analysis of Finance I or ECOM90011 Financial Econometrics or equivalent

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For the purposes of considering requests for Reasonable Adjustments under the Disability Standards for Education (Cwth 2005), and Students Experiencing Academic Disadvantage Policy, academic requirements for this subject are articulated in the Subject Description, Subject Objectives, Generic Skills and Assessment Requirements for this entry.

The University is dedicated to provide support to those with special requirements. Further details on the disability support scheme can be found at the Disability Liaison Unit website: http://www.services.unimelb.edu.au/disability/

The subject will focus on estimating and testing nonlinear models in finance including volatility models, artificial neural networks, factor models of contagion and discrete models of financial behaviour. Special attention will be given to applications in option markets (implied volatility and smiles), bond markets (level effects) and credit markets (default risk). Estimation and testing methods are based on maximum likelihood and generalised method of moments. The computer software used throughout the course is E-Views.

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

• Identify and apply recent advances in quantitative methods to solve a range of problems in finance;
• Describe how quantitative procedures can be applied in financial decision making;
• Demonstrate a sophisticated understanding of quantitative methods by reproducing existing results. This will involve using both mathematical and computer skills. The computer programs used are EViews, Matlab and Excel;
• Develop alternative frameworks for exploring new ideas in building alternative financial models;
• Evaluate the strengths and importance of research in applied finance and the implications of research for solving financial problems.

• 2000 word assignment due in second half of semester (20%)
• One 90 minute mid-semester test, due Week 5 (10%)
• A 2-hour final examination (70%)

You will be advised of prescribed texts by your lecturer.

This subject is not available as a breadth subject.

On successful completion of this subject, students should have improved the following generic skills:

• Evaluation of ideas, views and evidence
• Synthesis of ideas, views and evidence
• Strategic thinking
• Critical thinking
• Application of theory to economic policy and business decision making
• Summary and interpretation of information
• Statistical reasoning
• Problem solving skills
• Written communication
• Oral communication

This subject is only available to students enrolled in the second year of the Master of Finance.