AØKA08234U Financial Theory and Models (F))

Volume 2019/2020

MSc programme in Economics – elective course


Bacheloruddannelsen i økonomi – valgfag på 3. år

The Danish BSc programme in Economics - elective at the 3rd year


The course is part of the Financial line at the MSc programme in Economics,   symbolized by ‘F’.


The course introduces tools for the analysis of both discrete and continuous time asset pricing models. The pricing of derivaties under a no-arbitrage condition is studied and applied. Various interest rate models are introduced. Models for risky debt and optimal capital structure are studied.

Learning Outcome

After completing the course the student is expected to be able to:



  • Identify, describe and discuss core problems in the rigorous modeling of basic financial notions.
  • Understand the main technical tools used in rigorous modeling of discrete and continuous time economics.
  • Understand the main concepts of financial economics.
  • Assess and discuss both benefits and deficiencies of the applied methods and models under scrutiny.



  • Correctly select and apply core models to analyze problems in finance.
  • Master the analysis of a given problem in finance by selecting and correctly applying the pertinent tools.
  • Engage in academic discussions of financial economics and to assess both results and deficiencies of the applied models in a broader context of economics and society.



  • Apply the acquired skills to new areas of analysis in both financial economics as well as in broader fields of economics.
  • Apply and modify the studied tools and methods in new situations.
  • Apply the acquired skills as stepping stones to more advanced models and topics in finance and economics.

Text book: Tomas Björk. Arbitrage Theory in Continuous Time. Oxford Finance Series, 3rd Edition.


Supplementary teaching material and exercise lists provided by the teacher.

The student will benefit from attending "Corporate Finance and Incentives" from the study of Economics before or at the same time as the course.

The student should have a sound knowledge of markets and prices from Microeconomics I, and should have a basic knowledge of probability from "Probability Theory and Statistics" from the study of Economics.

For non-economic student it is recommended to have followed Business Economics, Mathematics A and Mathematics B from the study of Economics or similar before or at the same time as the course.
Lectures with sessions of interactive problem solving and analysis.
3 hours lectures once a week from week 36 to 50 (except week 42).

The overall schema for the BA 3rd year and Master can be seen at KUnet:
MSc in Economics => "Courses and teaching" => "Planning and overview" => "Your timetable"
BA i Økonomi/KA i Økonomi => "Kurser og undervisning" => "Planlægning og overblik" => "Dit skema"

Timetable and venue:
To see the time and location of lectures please press the link/links under "Se skema" (See schedule) at the right side of this page. E means Autumn.

You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E19; [Name of course]””
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn – Weeks 31-5”
Press: “ View Timetable”
  • Category
  • Hours
  • Exam
  • 3
  • Lectures
  • 42
  • Preparation
  • 161
  • Total
  • 206
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
The exam assignment is given in English and must be answered in English.
Exam registration requirements

There are no requirements that the student has to fulfill during the course to be able to sit the exam.


Written aids allowed
Marking scale
7-point grading scale
Censorship form
No external censorship
for the written exam. The exam may be chosen for external censorship by random check.
Exam period

The exam takes place in the exam venues of the university:

23 January 2020


Exam information:

The exact time and room will be available in the Digital Exam from the middle of the semester.


In special cases, the exam date can be changed to another day and time within the exam period.


For enrolled students more information about examination, rules etc. is available at the intranet for Master students (UK), Master students (DK) and Bachelor students (DK).



The written reexam take place in the exam venues of the university:

21 February 2020


NOTE: If only a few students have registered for the written re-exam, the reexam might change to an oral exam including the date, time and place for the exam, which will be informed by the Examination Office.


Reexam information:

Information about the reexam will be available in the Digital Exam early February.


More information is available at Master(UK),Master(DK) and Bachelor DK).


Criteria for exam assesment

Students are assessed on the extent to which they master the learning outcome for the course.


To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.