ECO 2060H Economic Theory -- Microeconomics
This course focuses on theories and techniques of decision-making by households, and firms. It examines the problem of measuring economic welfare, and the merits and shortcomings of the market mechanism in promoting it, although a basic element of the course is the precise analysis of quantitative relationships.
The objective of the course is to introduce students to the analysis of macroeconomics at the graduate level, with attention to the role of credibility and other current developments. The course emphasizes applied issues, such as the potential role for stabilization policy. ECO 2408H Econometrics for MFE Students
This course covers the development and application of statistical techniques in testing economic theory. It focuses on parameter estimation and hypothesis testing within the framework of the classical linear regression model, and on the analysis of the problems which arise when the basic assumptions are violated. Considerable attention is devoted to applications of the techniques. ECO 2503H Financial Economics I for MFE Students
This course is designed to introduce students to the fundamentals of financial markets and theories of asset pricing. It begins with an examination of asset pricing under certainty which forms the basis for determining the prices of fixed income securities. It then examines individual decision-making under uncertainty which provides the foundation for modern portfolio theory and determining the prices of risky assets. Alternative asset pricing theories investigated include CAPM, APT, CCAPM, and state preference theory. RSM 2306H Options and Futures Markets
This course covers forwards, futures, swaps, and options contracts. It deals with how the contracts work, how they are used, how they are valued, and how financial institutions hedge their positions in the contracts. The topics covered include Black-Scholes pricing, the use of binomial trees, and delta-gamma-vega hedging. RSM 2300H Corporate Financing
An investigation of the framework underlying corporate financing decisions. Among the problems analyzed are the capital structure of firms, the maturity structure of debts, dividend policies, share valuation models and alternative financing strategies and instruments. RSM 2302H Security Analysis and Portfolio Management
An examination of investment policies of individuals and institutions. Topics include security valuation models, utility theory, efficiency of capital markets, portfolio construction and performance measurement.
Suggested Electives for MFE Students
Below is a list of suggested electives for MFE students. These courses are good complements to the MFE core courses. The electives below also represent courses which MFE students in the past have selected. All elective courses should be approved by the Director of the Master of Financial Economics program.
Suggested Economics Course Electives
ECO 2104H Quantitative Macroeconomics – This class teaches numerical methods for computing static and dynamic equilibrium models to answer questions in macroeconomics. Students will learn computational techniques and programming in MATLAB, and use these techniques to solve optimization problems of economic agents, simulate their economic decisions, and find the equilibrium of macroeconomic models. Students will learn key solution techniques such as Euler equation and value function methods that are used to solve decision problems of economic agents. The central workhorse for the course will be the Neo-classical Growth Model, which will be solved in different variants to analyze a variety of applied issues, such as differences in employment and GDP across countries.
ECO 2300H International Trade Theory – The course develops the theory of international trade with emphasis on the structure of general equilibrium, the foundations of comparative advantage, determinants of the pattern of trade, the gains and losses from trade, trade impacts on the domestic and international distributions of income, commercial policy, and trade in a dynamic world. Throughout, careful attention is given to empirical evidence.
ECO 2303H International Macroeconomics
This course deals with contemporary issues in international monetary economics and macroeconomic policy in open economies, like Canada’s. The focus is on forces determining interest rates and exchange rates, inflation and unemployment. Government policy in relation to financial markets will be analysed.
ECO 2404H Empirical Applications of Economic Theory – The course covers methods and applications in economic theory and is intended to MA and PhD students. The focus is on structural econometric methods, emphasizing the interactions between economic theory and empirical methods rather than focusing just on the statistical analysis. The applications are at the core of the Empirical Industrial Organization, including estimation of demand functions and static oligopoly models; estimation of production functions; the use of control function methods; and moment inequalities estimators.
ECO 2411H Financial Econometrics
This course provides an introduction to the econometrics used in empirical finance. Topics will include parametric and nonparametric models of volatility, evaluation of asset pricing theories, and models for risk management, and transactions data. The course will emphasize estimation and inference using computer based applications.
ECO 2500H Monetary Theory I
The strategy of the course is to examine simple models to explore the importance of money, banks, and other financial institutions in the way economies work. The topics examined in this framework include: role of money, determination of the medium of exchange, effects of inflation, role of banks, control of the money supply, and effect of the National Debt on saving and investment.
ECO 2504H Financial Economics II
This course selects topics in current advanced research in financial economics. Theoretical and empirical models dealing with economic aspects of financial markets, intermediaries, and the financial decisions of firms are examined. Financial systems in developing as well as developed economies are examined.
ECO 2505H Macroeconometric Models for Policy Analysis and Forecasting
The course examines macroeconometric models and their applications in impact and policy analysis and in longer-term forecasting. Detailed examination is made of the macroeconometric model maintained at the University of Toronto and students gain 'hands-on' experience in its construction and use. A recent long-term forecast developed with the model at the University will also be examined. The course also studies the various important criticisms of macroeconometric models and briefly surveys alternative macroeconomic forecasting methods.
ECO 2506H Economics of Risk Management
This course focuses on the role of risk management in both private and public sectors. It includes a discussion of why firms and government should hedge financial risks, the individual and social gains of financial risk management, the identification and quantification of financial risks (including Value-at-Risk measures) and how derivative securities can be used for financial risk management.
ECO 2508H Topics in Risk Management
This is course is intended to drill down into details of some important and urgent issues concerning contemporary financial industry. The topics may include: Economic Capital and Stress Testing, Business Performance Measurement, Emerging Capital Markets and Risks, Innovative and Exotic Derivatives in capital Markets and Risks; Asset securitization and Risks; Hedge Funds and Risks. Please note the topics chosen for each term are subject to changes. The instructor will use the real world problems for research projects and case studies required by the course. This would encourage the students to take initiatives in researching, formulating and resolving the issues, reasoning through to obtain buy-in from a panel consisting of industrial practitioners. This is a new course and designed to best equip the participants with the most current knowledge and in-depth understanding in the risk management when entering the mainstream financial institutions
ECO 2510H Financial Market Microstructure
Security prices evolve through a large number of bilateral trades, performed by people that have specific, well-regulated and institutionalized roles. Market microstructure is the subfield of financial economics that studies the price formation process. Using the lens of theoretical economic models, this course reviews insights concerning the strategic trading behavior of individual market participants, and models are brought market data. The course further studies how public and private information, market regulation, and trading arrangements, such as limit order books or dark pools, affect behavior. The course will be taught at the graduate level and its nature is academic. For a practical introduction to trading consider enrolling in Tom McCurdy’s course (for MFEs) or Kevin Mak’s course (for BCom) or my UTM course MGT435.
ECO 2511H Empirical Financial Economics
The course has two goals. First, to equip students with the tools required to conduct empirical research in finance. And second, to present the most recent empirical facts in various areas of finance. Accordingly, in each lecture we will study both an empirical method, some examples of how it is applied in one field of finance, and the state of the empirical literature in that field.
ECO 2700H Economic Development
This course is a broad survey of the field of development economics with attention to general theories of development, key sectors such as agriculture and industry, mechanisms such as financial transfer and technological change, and worries such as the environmental costs of development.
ECO 2900H Industrial Organization I
ECO 2900 and ECO 2901 analyze the reasons why imperfect competition exists and the appropriate role of public policy. The first half uses applied micro theory to examine the structure of industry under such topics as the theory of the firm, barriers to entry and strategic entry deterrence, the role of advertising, oligopolistic pricing, and the economics of regulation. The second half applies the theory of organizations and contracts to public policy issues such as the economics of competition policy, analysis of vertical restraints, merger policy and the economics of the patent system.
ECO 2908H Industrial Organization and Competition Policy
The field of industrial organization (IO) is applied microeconomics/price theory concerned with the function of markets and the behavior of firms in these markets. In this course the focus is on two primary questions: (i) how do we explain observed behavior, prices or contractual practices by firms operating in markets that are not perfectly competitive? (ii) what is the role of government intervention in affecting market structure, the behavior of firms, and the efficient operation of markets? Recent developments in IO are both theoretical and empirical. This IO course stresses an understanding of the theory, including extensions and modern developments and applications of the theory.
ECO 3501H Economics Analysis of Law
This course applies economic analysis to a number of areas of the law. Examples of topics include property rights and the Coase theorem, torts and liability rules, the assessment of damages, contracts, product liability, bankruptcy law, crime and law enforcement, and family law.
ECO 3504H International Trade Regulation
This course, offered jointly with the Faculty of Law, will explore the regulatory framework governing international trading relations. The following topics will be examined: international economic institutions, the Bretton Woods System, the GATT, international regulation of tariffs, national tariff administration, the principles of nondiscrimination (most-favoured nation and national treatment) with a special focus on the case for bilateral Canada-U.S. free trade, antidumping regulation, subsidies and countervailing duties, safeguards, voluntary export restraints, and adjustment assistance. The course will strongly emphasize the institutions and political economy of international trading relations and how economic and political forces have shaped current regulatory policies and may shape future policies.
ECO 4050H Topics in Risk Management
This is course intended to drill down into details of some important and urgent issues concerning contemporary financial industry. The topics may include: Economic Capital and Stress Testing, Business Performance Measurement, Emerging Capital Markets and Risks, Innovative and Exotic Derivatives in capital Markets and Risks; Asset securitization and Risks; Hedge Funds and Risks. Please note the topics chosen for each term are subject to changes.
The instructor will use the real world problems for research projects and case studies required by the course. This would encourage the students to take initiatives in researching, formulating and resolving the issues, reasoning through to obtain buy-in from a panel consisting of industrial practitioners. This is a new course and designed to best equip the participants with the most current knowledge and in-depth understanding in the risk management when entering the mainstream financial institutions.
Suggested Rotman Course Electives
RSM 2011H International Business
In this course we address problems the multinational enterprise (MNE) must confront in order to successfully do business in the international marketplace, including international trade, international investment, and managing a global workforce. Successful students will learn to analyze the problems facing MNEs through mastery of concepts and their application to contemporary organizations. Topics include: Globalization, Political and Cultural Environments, International Trade, International Markets & Political Risk and Entry Strategies in International Markets.
RSM 2016 Causal Modeling for Integrative Business Strategies
This course is designed to nurture and extend students’ real-world modeling abilities. The course will cover both qualitative and quantitative causal modeling. Qualitative models are useful for such applications as “back-of-the-envelope” analysis, organizing one’s thinking about a complex issue at the start of a substantive analysis, or responding to case questions in an interview setting. Quantitative models are useful when precise answers are required – for example, building financial statements for an entrepreneurial business plan or exploring “what-if” scenarios for a corporate strategic plan or consulting engagement. Quantitative causal models are first developed for single decision maker analysis, then extended to analyze interactive decisions (game theory).
Students should be forewarned that, although only a basic understanding of probability and statistics is assumed, the course is heavy on quantitative analysis.
RSM 2129 Forecasting Models and Econometric Methods
The course provides an introduction to forecasting techniques based on time-series methods, single-equation econometric (‘regression’) equations, multiple-equation econometric models and volatility forecasting (‘ARCH’ techniques and their offspring). The forecasting applications considered span demand and price forecasting and financial variables. The course is “hands-on”, requiring use of the toolkit of techniques in Econometric Views – an econometrics package widely used in the forecasting community. Relatively little time is devoted to non-econometric forecasting techniques.
RSM 2130H Real Estate Investment
This class will provide an overview of real estate valuation, financing and investment, using finance and economics tools. Topics include real estate investment and development, mortgage and equity financing, real estate securitization and credit crunch, real estate brokerage, house price dynamics, homeownership decisions and government policies.
RSM 2203H Current Issues in Financial Reporting and Disclosure (Financial Accounting)
This is a course for students who are interested in understanding contemporary accounting and reporting problems as they relate to management decisions. The problems of financial accounting and reporting, and the effects on financial reports of variations in accounting procedures, are examined from a corporate management perspective.
RSM 2209H Financial Statement Analysis
The objective of this course is to develop a set of tools for in-depth financial statements analysis and valuation. The class emphasizes analysis rather than mechanical work. In order to analyze financial statements and the reporting strategy of companies we need to understand the underlying motivation of management to shade their financial statements in the way it best serves their overall strategy. The course emphasizes an integrative approach and, as such, has strong links with economics, marketing, finance and strategy.
RSM 2212H Business Analysis and Valuation
This course will help you value businesses using financial statements. We will discuss how accounting regulations and managerial discretion influence presented financial statements. You will understand how to interpret financial statements, analyze cash flows, make judgments about earnings quality and uncover hidden assets and liabilities. You will also be exposed to research from accounting and finance that focuses on how financial statement analysis can be used in devising trading rules. Finally, we will use financial statement analysis prospectively to forecast and value firms using cash flow based and accounting based methods.
RSM 2301 Financial Management
The course is designed to deepen the understanding of basic financial management decisions within a non-financial corporation and focuses on the application of modern financial techniques to operating and investing decisions. It comprehensively analyzes working capital management and capital budgeting decisions within the context of the firm’s business strategy. The course consists of two parts: the management of working capital (including short term financing), and internal long-term asset acquisition (investment a.k.a. capital budgeting and Capex) decisions.
RSM 2303 Risk Modeling & Financial Trading Strategies
This Lab-based course will integrate theory and practice by using simulation cases and real-time data links to both a simulated market and to quotes from actual markets. In particular we use: The Rotman Interactive Trader (RIT) platform, which simulates an order-driven market, to deliver learning-by-doing cases which, coupled with Excel support applications to apply the relevant theory, will guide decision making and allow us to derive effective strategies when faced with uncertainty and quantifiable risks. This training is analogous to using a flight simulator.
RSM 2304 Financial Institutions and Capital Markets
The course first provides a qualitative description of commercial banks, investment banks, insurance companies, mutual funds, and central banking. For each institution, the course discusses their basic business practices as well as the regulations and regulators guiding each institution. From a macroeconomic perspective, we consider how each of the institutions plays a role in economic activity and growth. We also consider some of the incentive problems with individuals managing their investments through institutions. These incentive problems provide the grounds and needs for regulation. Finally, the course considers the role of a central bank and describes how commercial banks work alongside the central bank to implement monetary policy. Throughout the course, discussion is raised about current interest rate policies and the implication of high- and low-rate interest rate environments for numerous institutions. Cases are used throughout the course to provide examples and illustrations of the challenges facing capital markets and financial institutions
RSM 2305H International Financial Management
This course focuses on the international dimension of financial management. It aims to develop a working knowledge of the institutional features and interdependence of international financial markets so that the benefits and costs of international investing and financing can be evaluated. There is a particular emphasis on measuring exposure to risks associated with multi-currency business and managing those risks. Topical issues such as exchange rate crises are also discussed.
RSM 2307H Advanced Derivatives
This course covers the mathematics underlying the pricing of derivatives and the numerical procedures that are used to implement derivatives pricing models. It includes in-depth material on exotic options and interest rate derivatives.
RSM 2308H Financial Risk Management
This course covers ways in which financial institutions, corporations, and fund managers can quantify and manage risks. It covers the calculation and use of value at risk, ways of forecasting volatilities and correlations, the quantification of credit risk, and credit derivatives.
RSM 2309H Mergers and Acquisitions
The objective of this course is to develop an understanding of the strategic asset acquisition and divestiture process. Firms constantly make small-scale decisions to make, lease or buy certain assets. The same ideas can be applied to larger scale assets and the major product divisions of the firm. These decisions involve mergers and acquisitions of existing firms, as well as spin-offs and divestitures of existing assets. This course will analyze these decisions from a financial perspective emphasizing valuation frameworks.
RSM 2310H Analysis and Management of Fixed Income Securities
The course will provide the tools to analyze and understand various bond structures, simple yield curve strategies and the different fixed income products across the credit spectrum.
RSM 2314H Private Equity and Entrepreneurial Finance
The primary objective of the course is to improve students’ ability to understand the concepts and institutions involved in entrepreneurial finance and private equity. The course utilizes tools and frameworks from economics, finance, strategy, accounting and law, applying them to case situations.
RSM 2315H Special Topics in Finance
Topics vary from year to year depending on the instructor
RSM 2408 The Art of Modeling with Spreadsheets
In this course we will learn how to structure, analyze, and solve business decision problems using Excel spreadsheets. We will focus on problems involving decision-making and risk analysis. The emphasis of the course will be on systematic, logical thinking, and problem solving on spreadsheets, illustrated by building and analyzing models of a variety of problems in finance, marketing, and operations. While the underlying concepts, models, and methods of this course are mathematical in nature, we will develop them on the more intuitive and user-friendly platform of spreadsheets. The spreadsheet approach to problem solving is more accessible to managers, as they often find spreadsheets a natural medium for organizing information and performing “what if” analyses. We will study how to use Excel and various add-ins to perform such analyses and interpret them
RSM 2522 Marketing and Behavioural Economics
The field of behavioural economics couples scientific research on the psychology of decision making with economic theory to better understand what motivates economic agents, including consumers, investors, employees, and managers. In this course, we will examine topics such as the role of emotions in decision-making, “irrational” patterns of how people think about products, money, or investments, self-control, and how expectations shape perceptions. Topics covered will include: Individual and group choice, choice complexity, intertemporal choice, emotional influences on choice, the role of behavioural economics in marketing, spending and savings behaviour, social welfare (e.g., health apps), decision engineering and choice architecture (e.g., in the field of debt or tax collection).