AØKA08234U Financial Theory and Models (F)

Volume 2022/2023

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.  Methods to price derivaties under a no-arbitrage condition are studied and applied. Various interest rate models are introduced. Models for risky debt and optimal capital structure are studied. The appropriate mathematical tools are introduced and explained in the course.

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.
  • Account for the main technical tools used in rigorous modeling of discrete and continuous time economics.
  • Account for 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.
  • Master 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 having attended "Corporate Finance and Incentives" or similar from the study of Economics, University of Copenhagen.

The student will benefit from attending "Financial Decision Making" or similar from the study of Economics, University of Copenhagen at the same time as the course.

The student should have a sound knowledge of markets and prices from a similar course as "Microeconomics I" from the Bachelor of Economics, University of Copenhagen.

The student should have a basic knowledge of probability from a similar course as "Probability Theory and Statistics" from the Bachelor of Economics, University of Copenhagen.

For non-economic student it is recommended to have followed similar courses as "Business Economics", "Mathematics A" and "Mathematics B" or similar from the Bachelor of Economics, University of Copenhagen, before or at the same time as "Financial Theory and Models".
Lectures supported by supplemental lectures and exercises

Changes to teaching methods due to a pandemic crisis:
The teaching in this course might be changed to either fully or partly online due to a pandemic crisis. If changes are implemented please read the study messages at KUnet or the announcements in the virtual course room on Absalon (for enrolled students).
2 hours lectures once a week from week 36 to 50 (except week 42).
2 hours exercise classes 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 under "Timetable"/​"Se skema" 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-E22; [Name of course]””
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn”
Press: “ View Timetable”

Please be aware:
- The schedule of the lectures and exercise classes can change without the participants´ acceptance. If this occures, you can see the new schedule in your personal timetable at KUnet, in the app myUCPH and through the links in the right side of this course description and the link above.
- It is the students´s own responsibility continuously throughout the study to stay informed about their study, their teaching, their schedule, their exams etc. through the curriculum of the study programme, the study pages at KUnet, student messages, the course description, the Digital Exam portal, Absalon, the personal schema at KUnet and myUCPH app etc.
  • Category
  • Hours
  • Lectures
  • 28
  • Class Instruction
  • 28
  • Preparation
  • 147
  • Exam
  • 3
  • Total
  • 206
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
Type of assessment details
ITX-exam in the exam venues of the university.
The exam assignment is in English and must be answered in English.

Changes to the exam due to a pandemic crisis:
In the event that restrictions from a pandemic crisis may affect the conduction of the ITX-exams, the written exam and the re-sit exam will change to a 3,5 hours written take-home exam. The changes will be announced in study messages at KUnet and in Digital Exam.

The take-home exams will still be individual and it is not allowed to communicate with any one about the exam assignment nor the solution at all. It is also prohibited to distribute data and other information at all. If this or alike actions happens, it will be regarded as cheating and plagiarism.
Exam registration requirements

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



All written aids allowed at the written ITX-exam.


If the ITX-exam changes to a take-home exam due to a pandemic crisis, the written take-home exam is with all aids.


For further information about allowed aids for the re-examination, please go to the section "Re-exam".


Marking scale
7-point grading scale
Censorship form
No external censorship
for the written exam. The written ITX-exam may be chosen for external assessment by random sample.

An oral re-examination may be with external assessment.
Exam period

The regular exam takes place:

19 December 2022


Exam information:

The exact time and place will be available in Digital Exam from the middle of the semester. In special cases decided by the Department, the exam can change to another place, type, day and/or time than announced. 


More information about examination, rules, aids etc. at Master(UK), Master(DK) and Bachelor(DK).



The written reexam takes place:

10 February 2023


If 8 or less students register for the written re-exam, it can change to an 20 min. oral exam with 20 min. preparation time.

All written aids allowed during the preparation time.

No aids allowed during the examination.


By pandemic restrictions, the re-sit can change to a 20 minutes oral online exam with all aids, without preparation time.


Reexam info:

Exact type, day, time and place is available in Digital Exam in February. In special cases decided by the Department, the re-sit can change to another place, type, day and/or time than announced.


More info: Master(UK),Master(DK) and Bachelor.

Criteria for exam assesment

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


In order to obtain the top grade "12", 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.


In order to obtain the passing grade “02”, the student must in a satisfactory way be able to demonstrate a minimal acceptable level of  the knowledge, skills and competencies listed in the learning outcomes.