The aim of the course is the acquisition of some knowledge on the modern theories of asset pricing and some related econometric problems. Instead of widely covering several individual approaches and particular directions in the literature, we focus on essential methodologies for applying these techniques with success in a structured and general way.
Prerequisiti
Some basic elements of linear algebra and portfolio selection theory are required
Metodi didattici
Lectures will be used as the main teaching method
Verifica Apprendimento
Learning objectives will be evaluated through a presentation of a published research paper on the topics of the course
Testi
Own slides and selected research articles
Contenuti
This course covers selected recent research topics in theoretical and empirical asset pricing. The common theme of the lectures is the construction of suitable model-free Stochastic Discount Factors (SDFs) that minimise convenient notions of SDF variability subject to the relevant asset pricing constraints. We cover univariate and multivariate markets, settings with frictions or ambiguity, recoveries based on option price information summarised by suitable portfolios replicating higher moment risk, and further reaching implications for the understanding of asset markets, investors beliefs and asset pricing factors. In parallel, we introduce a systematic convex analysis framework for understanding penalised estimation and inference about minimum dispersion SDFs in presence of pricing errors. Exploiting this estimation and inference approach, we present a new methodology for testing asset pricing models in presence of useless or weak factors.
1. Model-free SDFs and asset pricing bounds (a) Minimum dispersion SDFs in univariate and multivariate markets (b) Asset pricing bounds (c) Implications for international asset pricing
2. Model-free trading of higher-moment risk (a) Realised measures of higher-moment risk (b) Replication of higher moment risk (c) Implied moment surfaces (d) Implications for the pricing of jump risk
3. Almost model-free SDF recovery (a) SDF recovery problems (b) Almost model-free recovery (c) Implications for conditional SDF modelling
4. Beyond frictionless markets: Smart SDFs (a) Arbitrage-free pricing with non zero pricing errors (b) Minimum dispersion Smart SDFs (c) Relation to APT pricing (d) Implications for international asset pricing
5. A convex analysis framework for penalised estimation and inference (a) Basic elements of convex analysis (b) Penalised estimation and proximal estimation (c) From regular to singular designs (c) Inference and Oracle estimation with irregular designs (d) Insights for asset pricing
6. Tradeable factor risk premia and tests of asset pricing models (a) Intrinsic factor risk premia (b) Sample intrinsic factor risk premia (c) Oracle intrinsic factor risk premium estimation (d) Intrinsic factor selection and inference with the factor zoo