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Core courses

Students on the MPhil in Finance programme's Financial Engineering specialisation take the following core courses:

Advanced Financial Models

Taught by the Faculty of Mathematics (part of the Maths Part III degree).

This module is an introduction to the modelling of financial derivatives. It examines:

  • Discrete-time models. Survey of minimum-variance approaches to hedging. Complete and incomplete markets; minimal martingale measure. Characterisation of lack of arbitrage. Pricing assets in multi-period models. Optimal stopping; Snell envelope; relation to pricing American options.
  • Brownian motion and stochastic calculus. Introduction to Brownian motion; hitting times; martingales. Girsanov Theorem and change of measure. Stochastic integrals; Itô's Lemma. Ornstein-Uhlenbeck process.
  • Black-Scholes model. European call option; Black-Scholes formula. Self-financing portfolios; general partial differential equation for pricing claims. Barrier and other exotic options. Computational issues.
  • Interest-rate models. One-dimensional models: Vasicek; Cox-Ingersoll-Ross. Whole yield-curve approaches: Heath-Jarrow-Morton; Gaussian random-field models; characterisation of martingale measure; structure of covariance. Pricing interest-rate claims.

Asset Pricing I & II

This two-part course in asset pricing, one of the building blocks of finance, covers models that determine security prices and the methodologies used to empirically test their predictions. The course mixes theoretical and empirical lectures, with fifteen sessions over two terms.

Asset Pricing I & II requires a strong prior background in microeconomics and statistics/econometrics.

Corporate Finance I & II

Structured by topics, this course introduces you to theoretical and empirical research in corporate finance. Each topic examines the fundamentals of corporate finance theory (e.g. the theory of the firm's choice of its capital structure and dividend policy under alternative assumptions), as well as various essential areas in corporate finance (e.g. the notion of moral hazard and agency problems, adverse selection and signaling). The course further covers the related empirical evidence with a focus on recent research in empirical corporate finance and a critical assessment of the research design in empirical studies.

The course requires some basic knowledge of fundamental concepts in corporate finance (at the level of Brealey, Myers and Allen's Principles of Corporate Finance). We will recommend some summer reading as preparation to the course for those admitted to the MPhil.

Econometric Methods

Taught by the Faculty of Economics (course code M300).

This course examines:

  • Least squares
  • Large sample analysis
  • Maximum likelihood
  • Test procedures
  • Time series
  • Estimation and tests
  • Nonstationary and cointegrated regression
  • Computer packages

Fundamentals of Competitive Markets

You are introduced to the foundations necessary to conduct research in the three areas of marketing, operations, and finance with a view to developing your own skills as researchers in these areas and in business in general. This course covers standard models of:

  • individual choice under certainty and uncertainty
  • production theory
  • general equilibrium
  • monopoly pricing, price discrimination
  • information economics
  • behavioural economics

The course will give you some fundamental knowledge of competitive markets, enabling you to leverage your course knowledge to do original research and write papers in your chosen field of research in a business school.

choice of one of the following two courses:

Cross Section & Panel Data Econometrics

Taught by the Faculty of Economics (course code M320).

This course consists of lectures dealing with estimation and inference using both cross-section and panel data. Topics include:

  • Linear unobserved effects panel data models
  • Discrete choice I: multinomial models
  • Discrete choice II: the mixed logit model
  • Generalised method of moments I
  • Econometrics of demand systems for differentiated products
  • Dynamic panel data models
  • Count data models
  • Simulation based inference: classical and Bayesian
  • Panel data discrete choice models

You must have taken the Econometric Methods course if you wish to take this course.

Further Time Series with Applications in Finance & Macroeconomics

Taught by the Faculty of Economics (course code M310).

Topics include:

  • Time series analysis
  • Models and forecasting
  • Stationary stochastic processes
  • Estimation and testing
  • Time series models
  • Dynamic regression
  • Nonstationarity and co-integration
  • Nonlinear models and financial time series
  • State space models and the Kalman filter
  • Spectral analysis
  • Trends and cycles in macroeconomic time series
  • Macroeconomic models

You must have taken the Econometric Methods course if you wish to take this course.

plus one course selected from the various modules offered by the MPhil in Finance.

Scholarships

Funding available to our MPhil in Finance students includes University of Cambridge scholarships, Cambridge Judge Business School bursaries and external scholarships.

Find out more about scholarships