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Asset Pricing

  • Teacher(s)
    Roger Laeven, Michel Vellekoop
  • Research field
    Finance, Finance
  • Dates
    Period 3 - Jan 08, 2024 to Mar 01, 2024
  • Course type
  • Program year
  • Credits

Course description

This course provides an introductory yet comprehensive and rigorous treatment of modern asset pricing theory. Asset pricing is concerned with determining the value of an uncertain future payoff. Equivalently, it is concerned with explaining (variation in) expected returns on risky assets. It covers the following topics:
1. Expected utility, risk aversion and single period portfolio choice;
2. Mean-variance analysis and CAPM;
3. Linear factor models;
4. Stochastic discount factors and the Fundamental Theorem of Asset Pricing;
5. Dynamic programming and pricing in incomplete markets;
6. Derivatives

Course literature

Primary reading:
* Selected chapters from P: Pennacchi, G. (2008), Theory of Asset Pricing. Addison-Wesley. Note: The book went out of print. You can obtain pdf files of the book chapters at: https://gpennacc.web.illinois.edu/fin591.html
* Selected articles, lecture notes and other material, to be made available via Canvas.

Further Reading:
* Selected chapters from C: Cochrane, J. (2005), Asset Pricing (revised edition). Princeton University Press.