Skip to main content
Unit of study_

FINC6005: Advanced Asset Pricing

Semester 1, 2021 [Normal day] - Camperdown/Darlington, Sydney

This unit covers the fundamentals of asset pricing and valuation, under equilibrium conditions and under no-arbitrage restrictions. It reviews the main themes in modern asset pricing, and introduce ideas of importance to the evolution of the discipline, and consequently of relevance to a practitioner's long term perspective. The unit emphasises quantitative methods, so students are required to have fairly strong mathematical skills. Nevertheless, the mathematical tools needed in the unit are adequately reviewed.

Unit details and rules

Unit code FINC6005
Academic unit Finance
Credit points 6
Prohibitions
? 
None
Prerequisites
? 
FINC5001 or FINC6000
Corequisites
? 
None
Assumed knowledge
? 

None

Available to study abroad and exchange students

Yes

Teaching staff

Coordinator Guanglian Hu, guanglian.hu@sydney.edu.au
Type Description Weight Due Length
Final exam (Record+) Type B final exam Final Exam
n/a
40% Formal exam period 2 hours
Outcomes assessed: LO1 LO2 LO5 LO6 LO3 LO4
Online task Quiz 1
Short answer and/or MCQ
20% Week 04 1 hour
Outcomes assessed: LO1 LO6 LO5 LO2
Online task Quiz 2
Short answer and/or MCQ
20% Week 09 1 hour
Outcomes assessed: LO2 LO6 LO5 LO4 LO3
Assignment Assignment
Written and computational task
20% Week 13
Due date: 07 Jun 2021 at 23:59

Closing date: 14 Jun 2021
n/a
Outcomes assessed: LO1 LO2 LO5 LO6
Type B final exam = Type B final exam ?

Assessment summary

  • Quiz 1: It will cover the materials up to and including weeks 1-4.
  • Quiz 2: It will cover the materials up to and including weeks 5-8.
  • Final exam: It will cover the entire unit. 
  • Assignment: The assignment will consist of both theoretical questions and empirical application of models that are covered in the unit. Some aspects of the assignment may be computational and require students to critically analyse models and how well they explain financial data.

Detailed information for each assessment can be found on Canvas.

Assessment criteria

The University awards common result grades, set out in the Coursework Policy 2014 (Schedule 1).

As a general guide, a high distinction indicates work of an exceptional standard, a distinction a very high standard, a credit a good standard, and a pass an acceptable standard.

Result name

Mark range

Description

High distinction

85 - 100

Awarded when you demonstrate the learning outcomes for the unit at an exceptional standard, as defined by grade descriptors or exemplars outlined by your faculty or school. 

Distinction

75 - 84

Awarded when you demonstrate the learning outcomes for the unit at a very high standard, as defined by grade descriptors or exemplars outlined by your faculty or school.

Credit

65 - 74

Awarded when you demonstrate the learning outcomes for the unit at a good standard, as defined by grade descriptors or exemplars outlined by your faculty or school.

Pass

50 - 64

Awarded when you demonstrate the learning outcomes for the unit at an acceptable standard, as defined by grade descriptors or exemplars outlined by your faculty or school. 

Fail

0 - 49

When you don’t meet the learning outcomes of the unit to a satisfactory standard.

For more information see sydney.edu.au/students/guide-to-grades.

For more information see guide to grades.

Late submission

In accordance with University policy, these penalties apply when written work is submitted after 11:59pm on the due date:

  • Deduction of 5% of the maximum mark for each calendar day after the due date.
  • After ten calendar days late, a mark of zero will be awarded.

Academic integrity

The Current Student website  provides information on academic integrity and the resources available to all students. The University expects students and staff to act ethically and honestly and will treat all allegations of academic integrity breaches seriously.  

We use similarity detection software to detect potential instances of plagiarism or other forms of academic integrity breach. If such matches indicate evidence of plagiarism or other forms of academic integrity breaches, your teacher is required to report your work for further investigation.

You may only use artificial intelligence and writing assistance tools in assessment tasks if you are permitted to by your unit coordinator, and if you do use them, you must also acknowledge this in your work, either in a footnote or an acknowledgement section.

Studiosity is permitted for postgraduate units unless otherwise indicated by the unit coordinator. The use of this service must be acknowledged in your submission.

Simple extensions

If you encounter a problem submitting your work on time, you may be able to apply for an extension of five calendar days through a simple extension.  The application process will be different depending on the type of assessment and extensions cannot be granted for some assessment types like exams.

Special consideration

If exceptional circumstances mean you can’t complete an assessment, you need consideration for a longer period of time, or if you have essential commitments which impact your performance in an assessment, you may be eligible for special consideration or special arrangements.

Special consideration applications will not be affected by a simple extension application.

Using AI responsibly

Co-created with students, AI in Education includes lots of helpful examples of how students use generative AI tools to support their learning. It explains how generative AI works, the different tools available and how to use them responsibly and productively.

WK Topic Learning activity Learning outcomes
Week 01 Introduction Lecture (3 hr) LO1 LO5
Week 02 Mean-variance portfolio theory Lecture (3 hr) LO1 LO2
Week 03 Mean-variance portfolio theory Lecture (3 hr) LO1 LO2
Week 04 The capital asset pricing model (CAPM) and anomalies Lecture (3 hr) LO2 LO6
Week 05 The capital asset pricing model (CAPM) and anomalies Lecture (3 hr) LO2 LO6
Week 06 Consumption-based asset pricing models Lecture (3 hr) LO1 LO5 LO6
Week 07 Forecasting asset returns Lecture (3 hr) LO1 LO5 LO6
Week 08 Binomial options pricing model Lecture (3 hr) LO3 LO4
Week 09 Black-Scholes model 1 Lecture (3 hr) LO3 LO4
Week 10 Black-Scholes model 2 Lecture (3 hr) LO3 LO4 LO5 LO6
Week 11 Extracting information from option markets Lecture (3 hr) LO1 LO4 LO6
Week 12 Volatility derivatives Lecture (3 hr) LO3 LO5 LO6
Week 13 Review lecture Lecture (3 hr) LO1 LO2 LO3 LO4 LO5 LO6

Attendance and class requirements

Lecture recordings: All lectures and seminars are recorded and will be available on Canvas for student use. Please note the Business School does not own the system and cannot guarantee that the system will operate or that every class will be recorded. Students should ensure they attend and participate in all classes.

Study commitment

Typically, there is a minimum expectation of 1.5-2 hours of student effort per week per credit point for units of study offered over a full semester. For a 6 credit point unit, this equates to roughly 120-150 hours of student effort in total.

Learning outcomes are what students know, understand and are able to do on completion of a unit of study. They are aligned with the University's graduate qualities and are assessed as part of the curriculum.

At the completion of this unit, you should be able to:

  • LO1. explain and demonstrate mathematically the theory of the utility, equilibrium and arbitrage-free based approaches to asset pricing
  • LO2. explain and be able to derive modern portfolio theory and CAPM results
  • LO3. explain and demonstrate mathematically arbitrage theorems as they relate to asset pricing
  • LO4. describe the process of and show mathematically how to value options and other derivatives via the Black-Scholes and binomial methodology
  • LO5. use mathematics to model financial phenomena in non-standard scenarios
  • LO6. analyse critically the strengths and weaknesses of various asset pricing models and explain how they could be used/misused in practice.

Graduate qualities

The graduate qualities are the qualities and skills that all University of Sydney graduates must demonstrate on successful completion of an award course. As a future Sydney graduate, the set of qualities have been designed to equip you for the contemporary world.

GQ1 Depth of disciplinary expertise

Deep disciplinary expertise is the ability to integrate and rigorously apply knowledge, understanding and skills of a recognised discipline defined by scholarly activity, as well as familiarity with evolving practice of the discipline.

GQ2 Critical thinking and problem solving

Critical thinking and problem solving are the questioning of ideas, evidence and assumptions in order to propose and evaluate hypotheses or alternative arguments before formulating a conclusion or a solution to an identified problem.

GQ3 Oral and written communication

Effective communication, in both oral and written form, is the clear exchange of meaning in a manner that is appropriate to audience and context.

GQ4 Information and digital literacy

Information and digital literacy is the ability to locate, interpret, evaluate, manage, adapt, integrate, create and convey information using appropriate resources, tools and strategies.

GQ5 Inventiveness

Generating novel ideas and solutions.

GQ6 Cultural competence

Cultural Competence is the ability to actively, ethically, respectfully, and successfully engage across and between cultures. In the Australian context, this includes and celebrates Aboriginal and Torres Strait Islander cultures, knowledge systems, and a mature understanding of contemporary issues.

GQ7 Interdisciplinary effectiveness

Interdisciplinary effectiveness is the integration and synthesis of multiple viewpoints and practices, working effectively across disciplinary boundaries.

GQ8 Integrated professional, ethical, and personal identity

An integrated professional, ethical and personal identity is understanding the interaction between one’s personal and professional selves in an ethical context.

GQ9 Influence

Engaging others in a process, idea or vision.

Outcome map

Learning outcomes Graduate qualities
GQ1 GQ2 GQ3 GQ4 GQ5 GQ6 GQ7 GQ8 GQ9

This section outlines changes made to this unit following staff and student reviews.

No changes have been made since this unit was last offered.

Disclaimer

The University reserves the right to amend units of study or no longer offer certain units, including where there are low enrolment numbers.

To help you understand common terms that we use at the University, we offer an online glossary.