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Asset Pricing / LT Portfolio Mgt

  • Teacher(s): J.Walden
  • Course given in: English
  • ECTS Credits: 6 credits
  • Schedule: Spring Semester 2018-2019, 4.0h. course (weekly average)
  •  séances
  • site web du cours course website
  • Related programmes:
    Master of Science (MSc) in Finance, Orientation Asset and Risk Management

    Master of Science (MSc) in Finance : Financial Entrepreneurship and Data Science

    Master of Science (MSc) in Finance, Orientation Corporate Finance

 

Objectives

-

Contents

This is an intermediate course on asset pricing, portfolio choice and investment theory. The course will cover fundamental theory as well as practical implications, in three parts.

In the first part, on investor preferences and portfolio choice, we introduce the micro foundation for how investors make choices under uncertainty. Our main focus is on the neoclassical von Neumann-Morgenstern expected utility setting, but we will also discuss several rational and behavioral modifications and extensions, for example, Epstein-Zin preferences and Prospect Theory.

In the second part of the course, we study equilibrium asset pricing theory, introducing classical models like the Capital Asset Pricing Model (CAPM) and the Consumption-based CAPM (CCAPM). In addition to covering theory, we discuss the major implications for investors, e.g., with respect to diversification, systematic versus idiosyncratic risk, and consumption smoothing. We will also discuss several challenges for the theory, for example, the equity premium puzzle, the risk-free rate puzzle, and the excess volatility puzzle.

In the third and final part of the course, we study (no-) arbitrage theory, and its powerful applications to financial markets, e.g. the, markets for derivatives and bonds. We discuss the relationship between no-arbitrage and existence of risk-neutral pricing (or, equivalently, so-called stochastic discount factors). We also cover the Arbitrage Pricing Theory (APT). Finally, we discuss some exciting recent developments within asset pricing. The teaching format will be a combination of lectures, in-class quizzes, and assignments.

References

  1. Intermediate Financial Theory, 3rd Edition, by Jean-Pierre Danthine and John B. Donaldson, Academic Press/Elsevier, 2015.
  2. Theory of Financial Decision Making, by Jonathan Ingersoll, Rowman and Littlefield, 1987.
  3. Asset Pricing, Revised Edition, by John Cochrane, Princeton University Press, 2005.
  4. Dynamic Asset Pricing Theory, 3rd edition, by Darrell Duffie, Princeton University Press, 2001.
  5. Arbitrage Theory in Continuous Time, 3rd Edition, by Tomas Björk, Oxford University Press, 2009.

Pre-requisites

None

Evaluation

First attempt

Exam:
Written 3h00 hours
Documentation:
Allowed with restrictions
Calculator:
Allowed with restrictions
Evaluation:

Your overall course grade will be based on final exam performance, assignments, and in-class quizzes. The grade will be aggregated according to the following weights: 25% assignments, 25% quizzes, 50% final exam. The final exam is mandatory, whereas in-class quizzes and assignments are optional in the sense that if they do not contribute positively to your total grade, they will be excluded. Students are strongly recommended to hand in assignments and quizzes. The formula for the total course score is hence: 𿑇 =0.25(max(2E¿¿, E + A) + max(2E, E + Q)).

Allowed documentation : personal notes, home-made, maximum one A4 both sides

Retake

Exam:
Written 3h00 hours
Documentation:
Allowed with restrictions
Calculator:
Allowed with restrictions
Evaluation:
Allowed documentation : personal notes, home-made, maximum one A4 both sides


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