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Excerpt from course description

Asset Pricing Theory

Introduction

The objective of this course is to undertake a rigorous study of the foundations of modern financial economics in discrete-time settings. The course will cover the central themes of modern finance including investment decisions under uncertainty, mean-variance theory, dynamic capital-market equilibrium and asset valuation, and the potential application of these themes. Upon completion of this course, students should acquire a clear understanding of the major theoretical results concerning individuals' decisions under uncertainty and their implications for the valuations of securities.

Course content

  • Introduction and overview, review of basic economic theory, some empirical facts
  • Preferences, risk aversion
  • Portfolio choice in a two-period model
  • Markets: complete vs. incomplete, equilibrium, risk sharing
  • Arbitrage, state prices, law of one price, stochastic discount factors
  • Mean-variance analysis, beta representations
  • Conditional vs. unconditional models
  • Dynamic consumption-portfolio choice, dynamic programming
  • Equilibrium models, consumption CAPM, special cases
  • Exotic preferences: recursive, habit formation
  • Production models
  • Market imperfections: asymmetric information, transaction costs, capital immobility

Disclaimer

This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.