M9302 Mathematical methods in economy

Faculty of Science
Spring 2017
Extent and Intensity
2/1. 2 credit(s) (příf plus uk k 1 zk 2 plus 1 > 4). Type of Completion: zk (examination).
Teacher(s)
Mgr. Sherzod Tashpulatov, M.A., Ph.D. (lecturer)
Guaranteed by
doc. RNDr. Martin Čadek, CSc.
Department of Mathematics and Statistics – Departments – Faculty of Science
Contact Person: doc. RNDr. Martin Čadek, CSc.
Supplier department: Department of Mathematics and Statistics – Departments – Faculty of Science
Timetable
Mon 20. 2. to Mon 22. 5. Thu 15:00–16:50 M4,01024
  • Timetable of Seminar Groups:
M9302/01: Mon 20. 2. to Mon 22. 5. Thu 17:00–17:50 M4,01024, S. Tashpulatov
Prerequisites
No specific courses are required. Only basic knowledge of calculus, economics and English is expected.
Course Enrolment Limitations
The course is also offered to the students of the fields other than those the course is directly associated with.
fields of study / plans the course is directly associated with
there are 9 fields of study the course is directly associated with, display
Course objectives
The purpose of the course is to familiarize students with the fundamental concepts and methods of modern Economics. The course shows the application of optimization and regulation on the economic examples of consumer and producer theories, taxation, price regulation, growth theory, finance, auctions, and network industries. Students are expected to have elementary knowledge of calculus and the basics of Economics. The first block of the course starts with the consumer choice theory using graphical and formal approaches. Next, using illustrative examples we will see how consumers and producers interact and the endogenous price vector is determined. Then we start game theory applications. In particular we cover the following types of games: static, dynamic, (in)complete, and (im)perfect information games. We will also cover dominating strategies, pure strategies, mixed strategies, normal and extensive form representations, Nash equilibrium, subgame perfection. In the second block we cover Fisher’s intertemporal choice model under various settings. Then we review consumption and money multiplier models, which are followed by growth accounting and Solow residual. Before starting Solow growth model we study phase diagrams for continuous time. A numerical example will be presented in Excel and MatLab. In the third block we study shorter economic models and problems. They are trade, input-output, ratings, and Markov transition matrix models. We will also consider constrained optimization problem in electricity economics. In the fourth block we study finance topics: valuing of cash flow, net present value, and internal rate of return. We will review probability density and cumulative distribution functions with the application to the value at risk (VaR) model. We will also cover option valuing. The last topic in this block is devoted to risk analysis and measurement. We conclude this topic by the capital asset pricing model (CAPM) and estimate systematic risk in EViews. In the last block we will look into the mathematical apparatus for the auction theory and market design. We will also review liberalization in network industries and in particular electricity supply industry in Great Britain. Finally, we will look at the application of regression models in the energy sector. In particular we will review estimation of the demand equation for natural gas, hedging strategy, and stress test in EViews.
Syllabus
  • The course concentrates on the application of mathematical methods in different areas of economics. In particular we consider their applications in Microeconomics, Macroeconomics, Finance, Industrial Organization, and Energy Economics. Block 1: Consumer choice theory. Edgeworth box model. Static, dynamic, (in)complete, and (im)perfect information games. Dominating strategies, pure strategies, mixed strategies, normal and extensive form representations, Nash equilibrium, subgame perfection. Block 2: Fisher’s intertemporal choice model under various settings. Consumption and money multiplier models. Growth accounting and Solow residual. Solow growth model. Block 3: Trade, input-output, ratings, and Markov transition matrix models. Block 4: Valuing of cash flow, net present value, and internal rate of return. Value at risk (VaR) model. Option valuing. CAPM. Block 5: Auction theory and market design. Liberalization in network industries. Estimation of the demand equation for natural gas.
Literature
  • VARIAN, Hal R. Intermediate microeconomics : a modern approach. 6. ed. New York: W.W. Norton, 2002, xxiv, 688. ISBN 0393978303. info
  • Gibbons R., Game Theory for Applied Economists, Princeton University Press, 1992.
  • 3. Doepke, M., Lehnert, A. and Sellgren, A. (1999). Macroeconomics
  • 1. Robert J. Barro and Xavier Sala-i-Martin (2004). Economic Growth
  • 2. Bhattacharyya, S.C. (2011). Energy Economics: Concepts, Issues, Markets and Governance
  • 3. Tashpulatov S. (2014). Network industry liberalization: The case of the England and Wales electricity market
Teaching methods
Lectures and homeworks.
Assessment methods
The overall course grade will be computed by converting into a grade-point score the total number of points gained from midterm exam – 20%, final exam – 40%, two quizzes – 10%, two HW assignments – 10%, class participation – 20%.
Language of instruction
English
Further comments (probably available only in Czech)
Study Materials
Information on the per-term frequency of the course: nepravidelně.
The course is also listed under the following terms Spring 2011 - only for the accreditation, Autumn 2008, Spring 2010, Spring 2011, Spring 2012, spring 2012 - acreditation, Spring 2013, Spring 2014, Spring 2015, Spring 2016.
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