School of School of Banking and Finance
FINANCIAL THEORY AND POLICY
Semester 2, 2015
Part A: Course-Specific Information
Part B: Key Policies, Student Responsibilities
1. Weak-form efficiency
Prices of the securities instantly and fully reflect all information of the past prices. This
means future price movements cannot be predicted by using past prices. It is simply to say
that, past data on stock prices are of no use
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2 Period Model
What is finance? 1) The study of capital markets and its major participants: Fin. Inst; Govt; Households;
Non-fin. Inst. 2) Valuation of riskiness of CF streams: pricing the uncertainty of size + timing of CF in the
A measure of the absolute amount of wealth an individual is willing to expose to risk as a
function of changes in wealth. Decreasing absolute risk aversion means that the amount of
wealth someone is willing to expose to risk increases as wealth increases.