Financial Eco

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The Financial Economics – I Course for BA (Hons) Economics Semester V, Delhi University has been taught by Mr. Dheeraj Suri. The Video Lectures are based upon the books prescribed by the University of Delhi. The Duration of Video Lectures is approximately 40 Hours.

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Demo Lectures

Click Here for Reading List of Financial Economics

Course Content of Our Video Lectures

Lectures are as per the Latest Syllabus for 2023

Unit – I : Investment Theory & Portfolio Analysis

Chapter 1 : Theory of Interest [102 Minutes]

Based Upon Brealy, Chapter 5

Number of Lectures  2 Lectures

Duration of Lectures  102 Minutes

Topics Covered

1.1 ►Net Present Value (NPV), Internal Rate of Return (IRR), Multiple IRR’s

1.2 ►Drawback of IRR, Numericals on IRR

Chapter 2 : Fixed Income Securities [376 Minutes]

Based Upon David G. Luenberger, Chapter 3

Number of Lectures  5 Lectures

Duration of Lectures  376 Minutes

Topics Covered

2.1 ►Security Meaning, Kinds of Fixed Income Securities,

2.2 ►Annuity, Present Value & Future Value of Annuity, Perpetuity, Amortization of Loan, Valuation of Bonds,

2.3 ►Problems and Solutions on Annuity,

2.4 ►Yield, Basic Yield, Yield to Maturity, Price Yield Curve,

2.5 ►Duration of a Bond, Macaulay Duration, Properties of Duration, Duration & Price Sensitivity, Modified Duration

Chapter 3 : Term Structure of Interest Rate [96 Minutes]

Based Upon David G. Luenberger, Chapter 4

Number of Lectures  2 Lectures

Duration of Lectures  96 Minutes

Topics Covered

3.1 ►Yield Curve, Spot Rate & Forward Rate, Theories of Term Structure of Interest Rate, Expectations Theory, Liquidity Preference Theory, Market Segmentation Theory,

3.2 ►Problems and Solutions

Unit – 2 : CAPM

Chapter 4 : Mean Variance Portfolio Theory [230 Minutes]

Based Upon David G. Luenberger, Chapter 6

Number of Lectures  4 Lectures

Duration of Lectures  230 Minutes

Topics Covered

4.1 ►Mean Variance Portfolio Theory, Total Return, Rate of Return, Short Sales, Portfolio Returns,

4.2 ►Portfolio Mean and Variance, Diversification, Diagram of a Portfolio,

4.3 ►The Feasible Set, The Minimum Variance Set & Efficient Frontier, Markowitz Model, Two Fund Theorem, One Fund Theorem,

4.4 ►Problems and Solutions,

Chapter 5 : The Capital Assets Pricing Model [192 Minutes]

Based Upon David G. Luenberger, Chapter 7

Number of Lectures  3 Lectures

Duration of Lectures  192 Minutes

Topics Covered

5.1 ►Capital Asset Pricing Model, Market Equilibrium, Capital Market Line, The Pricing Model,

5.2 ►Meaning of Beta, Beta of a Stock and of a Portfolio, Types of Risk, Systematic and Non-Systematic Risk, Security Market Line, Investment Implications, CAPM as a Pricing Formula,

5.3 ►Problems and Solutions,

Unit – 3 : Options and Derivatives

Chapter 6 : Forward & Future Contract [144 Minutes]

Based Upon John C. Hull, Chapter 2

Number of Lectures  3 Lectures

Duration of Lectures  144 Minutes

Topics Covered

6.1 ►Futures Contract, Specifications of a Futures Contract, Futures Price, Convergence of Futures Price to Spot Price,

6.2 ►The Operations of Margins, Initial Margin, Maintenance Margin, Variation Margin, Marking to Market, Role of Exchange, Clearing House, Difference Between Forward Contract and Futures Contract,

6.3 ►Problems and Solutions,

Chapter 7 : Futures Prices [107 Minutes]

Based Upon John C. Hull, Chapter 5

Number of Lectures  3 Lectures

Duration of Lectures  107 Minutes

Topics Covered

7.1 ►Determination of Forward & Future Prices, Forward Price for an Investment Asset, Futures Price of a Non Dividend Paying Asset,

7.2 ►Known Income, Problems and Solutions,

7.3 ►Futures Prices of Stock Indices, Futures on Commodities, The Cost of Carry< Problems & Solutions

Chapter 8 : Hedging Using Futures [140 Minutes]

Based Upon John C. Hull, Chapter 3

Number of Lectures  3 Lectures

Duration of Lectures  140 Minutes

Topics Covered

8.1 ►Short Hedges, Long Hedges, Basis Risk,

8.2 ►Choice of Contract, Cross Hedging, Optimal Number of Contracts, Tailing the Hedge, Problems & Solutions,

8.3 ►Stock Index Futures

Chapter 9 : Interest Rate Futures [70 Minutes]

Based Upon John C. Hull, Chapter 6

Number of Lectures  2 Lectures

Duration of Lectures  70 Minutes

Topics Covered

9.1 ►Day Count and Quotation Conventions, Treasury Bond Futures,

9.2 ►Eurodollar Futures, Duration Based Hedging Strategies

Chapter 10 : Mechanics of Options Market [134 Minutes]

Based Upon Chapter 10, Basu & Hull

Number of Lectures 3 Lectures

Total Duration of Lectures 134 Minutes

Chapter 11 : Properties of Stock Options [152 Minutes]

Based Upon Chapter 11, Basu & Hull

Number of Lectures 2 Lectures

Total Duration of Lectures 152 Minutes

Chapter 12 : Options Strategies [160 Minutes]

Based Upon Chapter 12, Basu & Hull

Number of Lectures 3 Lectures

Total Duration of Lectures 160 Minutes

Chapter 13 : Binomial Trees [60 Minutes]

Based Upon Chapter 13, Basu & Hull

Number of Lectures 3 Lectures

Total Duration of Lectures 130 Minutes

Chapter 14 : ITO’s Lemma [ Minutes]

Based Upon Chapter 14, Basu & Hull

Number of Lectures 1 Lectures

Total Duration of Lectures Minutes

Chapter 15 : The Black Scholes Merton Model [ Minutes]

Based Upon Chapter 15, Basu & Hull

Number of Lectures 3 Lectures

Total Duration of Lectures Minutes

Chapter 16 : The Greek Letters [ Minutes]

Based Upon Chapter 19, Basu & Hull

Number of Lectures 1 Lectures

Total Duration of Lectures Minutes

End of Syllabus

Syllabus for Financial Economics as prescribed by University of Delhi


Course Description

Financial Economics (HE54)

Discipline Specific Elective (DSE) Credit: 6

Course Objective

This course provides a strong theoretical foundation and an economic framework to understand the world of modern finance. Major topics in the course include: time value of money; fixed-income securities; bond pricing and the term structure of interest rates; portfolio theory and pricing models such as the capital asset pricing model; hedging, speculation, and arbitrage; futures and options contracts; determination of forward and futures prices; trading strategies involving options; binomial trees; and the Black-Scholes-Merton option pricing model

Course Learning Outcomes

Students acquire extensive theoretical knowledge in portfolio risk management, capital asset pricing, and the operation of financial derivatives. The course familiarises students with the terms and concepts related to financial markets and helps them comprehend business news/articles better. The course also helps to enhance a student’s understanding of real life investment decisions. The course has a strong employability quotient given the relatively high demand for skilled experts in the financial sector.

Unit 1

Investment theory and portfolio analysis: deterministic cash flow streams; basic theory of interest; discounting and present value; internal rate of return; evaluation criteria; fixed-income securities; bond prices and yields; interest rate sensitivity and duration; immunisation; the term structure of interest rates; yield curves; spot rates and forward rates

Unit 2

Single period random cash flows; mean-variance portfolio theory; random asset returns; portfolios of assets; portfolio mean and variance; feasible combinations of mean and variance; mean-variance portfolio analysis: the Markowitz model and the two-fund theorem; risk-free assets and the one-fund theorem. CAPM: the capital market line; the capital asset pricing model; the beta of an asset and of a portfolio; security market line; use of the CAPM model in investment analysis and as a pricing formula; the CAPM as a factor model, arbitrage pricing theory

Unit 3

Futures, options and other derivatives: introduction to derivatives and options; forward and futures contracts; options; other derivatives; the use of futures for hedging, stock index futures; forward and futures prices; interest rate futures and duration-based hedging strategies, option markets; call and put options; factors affecting option prices; put-call parity; option trading strategies: spreads; straddles; strips and straps; strangles; the principle of arbitrage; discrete processes and the binomial tree model; risk neutral valuation; stochastic process (continuous variable, continuous time), the Markov property, Itô’s lemma; the idea underlying the Black Scholes-Merton (BSM) differential equation, BSM pricing formulas; the Greek letters


  1. Brealey, R., Myers, S., Allen, F., Mohanty, P. (2013). Principles of corporate finance, 10th ed. Tata McGraw-Hill.
  2. Hull, J., Basu, B. (2017). Options, futures, and other derivatives, 9th ed. Pearson Education.
  3. Luenberger, D. (2013). Investment science. Oxford University Press.