Asset Pricing
 Teacher(s): L.Bretscher
 Course given in: English
 ECTS Credits: 6 credits
 Schedule: Spring Semester 20202021, 4.0h. course (weekly average)
 sessions
 course website

Related programmes:
Master of Science (MSc) in Finance, Orientation Corporate Finance
Master of Science (MSc) in Finance, Orientation Asset and Risk Management
Master of Science (MSc) in Finance : Financial Entrepreneurship and Data Science 
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ObjectivesThis 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 NeumannMorgenstern expected utility setting, but we will also discuss several rational and behavioural modifications and extensions. 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 Consumptionbased 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 riskfree 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 noarbitrage and existence of riskneutral pricing (or, equivalently, socalled stochastic discount factors). We also cover the Arbitrage Pricing Theory (APT). Finally, we discuss some exciting recent developments within asset pricing. Contents
References
PrerequisitesA good understanding of calculus and probability theory is required. EvaluationFirst attempt
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