ECON60401 exam information The structure of the exam paper. The exam paper will consist of two sections A and B. You will have to answer all questions in both sections. Questions in section A will deal with numerical problems analogous to those given in the lectures, exercise classes and take-home tests. Questions in section B will assess the theoretical skills you gained from studying the course. Numerical data in some of the questions might be different for different students: they will depend on several digits in the student’s ID number. For example, it might be said that “there is a riskless asset whose return r is constant and equal to 0.03k, where k is the 3rd digit in your student ID number (e.g., if your ID is 10154977, then r=0.031).” Questions on derivative securities pricing will focus on particular examples of derivative securities with payoff functions that have not been considered in the course (in the lectures, exercise classes and take-home tests). In this course, algorithms for the pricing of derivative securities with any payoff functions were developed, and you have to demonstrate the knowledge of these algorithms by applying them to examples of derivative secur
ities to which you have not applied them before. Questions in section A. To pass the exam it will be sufficient to answer the computational questions in Section A. When answering these questions, you have to: (i) show the knowledge of the computational procedure and record all the calculations; (ii) give correct numerical answers. In a standard exam with strict time limitations, numerical errors were to a certain extent forgivable (as long as the knowledge of the computational algorithm was demonstrated). In the open-book exam, where you have enough time to double check your calculations, substantial numerical errors are not acceptable and will lead to a reduction in the mark. Questions in section B. To answer these questions you need to have a good command of the theory presented in the course, including all the mathematical results (theorems, propositions, formulas, etc.) and the methods of their proofs. You will have to perform an analysis of a financial market model requiring proofs of mathematical assertions or derivations of some formulas. Questions in section B might be more difficult than those in section A, but if you wish to get a higher mark, you will need to cope with this task.