Masters in Financial Economics are usually one to one and a half years in duration, and typically include a
thesis or research component. The nature of the degree differs by university. Generally, the degree is largely theoretical, and prepares graduates for research positions, for doctoral study in
economics, or for roles in
applied economics. in investment banking and finance, and are comparable to the
Master of Science in Finance, though with an increased weighting towards economic theory. In some cases, programs are substantially quantitative and are largely akin to a
Master of Quantitative Finance. The curriculum is distributed between theory, applications, and modelling, with the emphasis on each differing by university and program, as outlined. • The theory component centres on The degree essentially explores how
rational investors would apply
decision theory to the problem of investment. Investment under "certainty" is initially considered (
Fisher separation theorem,
"theory of investment value",
Modigliani–Miller theorem).
Choice under uncertainty is then introduced, and the twin assumptions of
rationality and
market efficiency lead to
modern portfolio theory and the
CAPM, and to the
Black–Scholes theory for
option pricing. Where the program emphasizes economics, the curriculum is extended: it explores phenomena where these assumptions do not hold (
market microstructure,
behavioural finance) and it discusses models which are further generalised (
arbitrage pricing theory,
continuous time finance /
Martingale pricing) or extended (
Multi-factor models,
models of the short rate,
intertemporal CAPM,
Black–Litterman model). Coursework here is often titled "
Asset pricing" and "Corporate finance theory". Economics focused programs (often) separately cover
microeconomics or decision theory as foundational topics. • Application • The modelling curriculum complements both of the above. The theory is augmented via the study of
econometrics,
financial time series and
statistical modelling, with a focus on the empirical and statistical
testing of economic theory, and on developing and documenting new econometric models. Students are taught to model using
statistical packages such as
SAS and
EViews - and increasingly
Python and
R. The applications are reinforced through the
computer based implementation of the more complex problems (often including
numeric methods for option pricing,
Value at risk,
portfolio optimization and
yield curve modeling). Here, though, the focus is typically on the
concept as opposed to the
modelling, and may therefore be limited to the
spreadsheet environment:
Computational finance is the domain of specialized degrees, although some Financial Economics programs do emphasize mathematical modelling and programming. The programs require a
bachelor's degree prior to admission, but do not (usually) require an undergraduate
major in finance or economics; a typical requirement is exposure to (
multivariable)
calculus and
differential equations,
statistics and
probability theory, and
linear algebra. Many programs include
a review of these topics as an admission- or preliminary course. ==Comparison with other qualifications==