Applied Finance provides a comprehensive introduction to the pricing of financial assets. It will cover the main pillars of asset pricing, including choice theory, portfolio theory, Arrow-Debreu pricing, arbitrage pricing, and dynamic models.
Course Prerequisites
Solid knowledge in Mathematics (including calculus, linear algebra, probability, and optimisation). Basic knowledge in Statistics (descriptive statistics, regression analysis). Programming skills: Matlab and Excel.
Teaching Methods
Classroom lectures. Matlab/Excel laboratory. Exercises, code development, and data analysis
Assessment Methods
The final grade is computed as follows: Final written exam with 5 or 6 theory questions and exercises for a total of 33 points. The exam takes 2 hours.
Texts
Danthine, J-P. and J. Donaldson, 2005, Intermediate Financial Theory, 2nd edition, Elsevier Academic Press.
Contents
01 Introduction: The Challenges of Asset Pricing 02 Choice Theory, Utility Functions, and Risk Aversion 03 Portfolio Theory: Theory and Matlab laboratory 04 Capital Asset Pricing Model 05 Arrow-Debreu Pricing 06 Risk Neutral Pricing 07 Arbitrage Pricing Theory and Factor Models 08 The Consumption Capital Asset Pricing Model 09 Dynamic Models: the binomial model. Theory and Matlab/Excel laboratory.
