金融经济学期末代考 ECON3006/4437/8037代写 金融经济代写

ECON3006/4437/8037: Financial Economics

Final Exam Semester

金融经济学期末代考 • 100%=25 points, writing time: 210 minutes (including reading/scanning/uploading time) Nov. 19, Start 12:00, End: 15:30 GMT+10

• 100%=25 points, writing time: 210 minutes (including reading/scanning/uploading time) Nov. 19, Start 12:00, End: 15:30 GMT+10

• Name the uploaded file in the form of “uni id-FINAL”.

• NO working within groups is allowed!!

• Any form of cheating will lead to grade of zero 0% and will be dealt with via disciplinary action. No Late submissions!!

• Please explain formulas and variables briefly in your answer.

• Have your textbook, lecture notes, and any other source open.

• Upload scanned solutions on Wattle.

1. [2points] 金融经济学期末代考

Explain in up to 100 words the relation between the concept of diversi-fication and convex preference relations.

2. [2points]

Explain in up to 100 words, the difference between the Rational Expectation Hypothesis and the Efficient Market Hypothesis.

3. [1 + 1 + 1 + 1 = 4points] 金融经济学期末代考

Let there be two states S = 2 and gamble Y = (1, 10) based on a fair coin. Assume you observe an agent with a certainty equivalent of Y that is higher than its expected value of Y .

(a) Explain the the agent’s situation formally.

(b) Plot a self-explaining picture that illustrates your argument from (a).

(c) What can you say about the risk preferences?

(d) Is your answer in (b) and (c) independent of the underlying probability model? Explain in 2 sentences.

(a) Which assets and states are involved? Explain in 2 sentences.

(b) Specify the portfolio strategy that replicates a contingent claim which equals the sum of the Arrow securities within the specification.

(c) Is the market arbitrage-free? What can you say about risk neutral prices? Explain in 2 sentences.

(d) Is the market complete? What would happen if you add an asset? Explain in 2 sentences.

(e) Which change to the price q modifies your response for part (a)? Explain in 2 sentences.

(f) Which choice of X modifies your response for part (b)? Explain in 2 sentences.

5. [1 + 1 + 1 + 1 + 1 + 1 = 6points] 金融经济学期末代考

(Dynamic) Let there be three independent fair coins that determine the endowment at each time t = 1, 2, 3

(90, 120).

Moreover, the discount rate is δ = 95% and assume constant relative risk aversion (RRA =2) under the von Neumann Morgenstern model with consumption at each time t = 0, 1, 2, 3.

Please give clear reference to the specific result from the Lecture slides, book or any other source, that you use when answering the following questions:t

(a) Specify the uncertainty model, information structure, endowment and the utility of the endowment at time t = 0 and t = 2. 金融经济学期末代考

(b) Specify the stochastic discount factor of the single-agent no-trade equilibrium.

(c) Formulate the stochastic Euler equation when endowments and dividends coincide.

(d) What is the risk free rate based on (c)? Explain in 2 Sentences.

(e) (i) What is the standard deviation of the endowment at each point in time?

(ii) Explain if and how this is relevant for the excess premium or the risk-free rate, when based on the consumption-based CAPM.

(f) Based on part (e): How will the risk-free rate change if the RRA would goes up/down.

Hint: for (b), (c), (d) and (e)(ii) you can directly use the results from the lecture or the book.

6. [2 + 1 + 1 = 4points] 金融经济学期末代考

(Regulation∗ ) Assume the government of Australia plans to forbid (A) short sales or (B) introduce a speculation tax of 10%. Consider a model with two dates t = 0, 1, given initial wealth w ∈ R and zero initial endowment ω ∈ R^S . There is consumption at t = 0, 1.

(a) Model the effect on the two resulting budget sets for some agent with initial endowment (at time t = 1) and wealth (at time t = 0) within an economy with consumption today and tomorrow.

Hint: (A) you can check the web. (B) the tax affects only a specific share of the wealth/consumption.

(b) Discuss the conceptual differences of the two policies.

(c) Do a comparative statics analysis for the case of a speculation tax: How is the tax rate changing the budget set? Illustrate this for the case S = 2 graphically.

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