Master of Commerce (M.Com.) Financial Economics Syllabus - Mumbai University

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Syllabus for Financial Economics

Mandatory course · Semester 4 · M.Com. Business Economics · 4 credits

Module I: Fundamentals of Financial Economics (2 Credits)

Unit 1 Meaning, scope, importance and basic concepts of Financial Economics
Introduction: Definition of financial Economics-Relationship between finance and economics- Scope of financial economics: micro and macro perspectives.
Importance: Role of financial economics in decision-making in areas of corporate finance, investments, and financial markets.
Basic concepts: Financial markets and Instruments-Risk and return trade-off-Time value of money and its applications.
Unit 2 Portfolio Theory and Asset Pricing
Modern Portfolio Theory (MPT): Risk minimization and optimal portfolio construction- Assumptions and limitations of MPT.
Capital Asset Pricing Model (CAPM): Assumptions and Derivation-Security Market Line
(SML) and risk-free assets-Beta as a measure of systematic risk.
Arbitrage Pricing Theory (APT): Foundations of APT and comparison with CAPM-Arbitrage
opportunities and implications for pricing

Module II: Fundamentals of Financial Markets (2 Credits)

Unit 3 Money and Derivative Markets
Institutions and constituents - Call Money Market - The Discount Market -The ‘Parallel’
Markets – The Interbank Market -The Market for Certificates of Deposit - The Commercial
Paper Market - The Local Authority Market - Repurchase Agreements.
An introduction to financial derivatives: Types and uses of derivatives; Forward
Contracts: determination of forward prices, Futures Contract: theories of future prices- the cost of carry model, the expectation model, capital asset pricing model.
Relation between Spot and Future Prices, forward vs future contract, Hedging in Futures;
Options: types, value of an option, the Pay-Offs from Buying and Selling of Options; the Put
Call.
Unit 4 Capital Market
The Importance of Capital Markets - Characteristics of Bonds and Equities - The Trading of Bonds and Equities - Bonds: Supply, Demand and Price - Equities: Supply, Demand and Price.
Fundamentals of Valuation of Securities: Valuation of Bonds and Stocks; Bond Yield, Yield to Maturity. Equity Valuation: Dividend Discount Model, The P/E Ratio Approach;
Irrelevance of Dividends: Modigliani and Miller Hypothesis.
Regulations - Securities and Exchange Board of India Act, 1992 - Prohibited Transactions - Insider Dealing -Market Abuse - Money Laundering -Corporate Governance and Management
Guidance And Supervision - Role of stock exchanges and NSDL.

Suggested References

1 Fabozzi, Frank, Modigliani, Franco, Jones, Frank (Feb 2009), Foundations of Financial Markets and Institutions, International Edition, 4th Edition, Pearson Higher Education.
2 Eakins, Stanley G. (2005), Financial Markets and Institutions (5th Edition), Addison Wesley.
3 Howells, Peter, Bain, Keith (2007), Financial Markets and Institutions, 5th Edition.
4 Madura, Jeff (2008), Financial Markets and Institutions, 8th edition, Thomson Publications.
5 Kidwell, David, Blackwell, David W., Whidbee, David A. et.al. (2008) Financial Institutions, Markets, and Money, 10th Ed., John Wiley & sons.
6 Barth, James R., Caprio, Gerard, and Levine, Ross (2008), Bank Regulations are Changing: For Better or Worse?, Association for Comparative Economic Studies.
7 Goldstein, Morris (2006), Financial Regulation after the Subprime and Credit Crisis,
a Washington: Peterson institute.
8 Wymeersch, Eddy (2006), The Structure of Financial Supervision in Europe: About Single, Twin Peaks and Multiple Financial Supervisors, Social Science Electronic Publishing, Inc.
9 G Yoganandham, (2021) Financial Economics
10 Satya R. Chakravarty (2014) An Outline of Financial Economics
11 L. M. Bhole and J. Mahukud, Financial Institutions and Markets, Tata McGraw Hill, 5th edition, 2011.
12 Hull, John C., Options, Futures and Other Derivatives, Pearson Education, 6th edition, 2005.
13 David G. Luenberger, Investment Science, Oxford University Press, USA, 1997.
14 Thomas E. Copeland, J. Fred Weston and KuldeepShastri, Financial Theory and Corporate Policy, Prentice Hall, 4th edition, 2003.
15 Richard A. Brealey and Stewart C. Myers, Principles of Corporate Finance, McGrawHill, 7th edition, 2002.
16 Stephen A. Ross, Randolph W. Westerfield and Bradford D. Jordan, Fundamentals of Corporate Finance. McGraw-Hill, 7th edition, 2005.

Reproduced from the University of Mumbai syllabus for M.Com. (Business Economics) under NEP 2020, in force from the academic year 2023-24. Wording is as printed in that syllabus. Module numbering is as printed there too.

The complete syllabus

This subject is cut from the University circular for its specialisation. Open a document here if you want the whole thing rather than a single subject.

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