Asset pricing in competitive markets where traders have homogeneous information as well as empirical tests of asset-pricing models and associated "anomalies" are also surveyed. Measures of riskiness and risk aversion; atemporal asset-pricing models; dynamic portfolio choice; option pricing; and the term structure of interest rates, corporate investment and financing decisions, and taxation are studied.
Professor/InstructorYuliy V. Sannikov, Wei Xiong
Theories and empirical evidence regarding financial markets and institutions that focus on asymmetric information, transaction costs, or both; and rational expectation models of asset pricing under asymmetric information, dynamic models of market making, portfolio manager performance evaluation, principal-agent models of firm managerial structure, takeover bids, capital structure, and regulation of financial markets are studied.
Professor/InstructorMarkus Konrad Brunnermeier, Wei Xiong
Advanced asset pricing and corporate finance including a selection from: models of financial crises and bubbles; interaction between finance and macroeconomics, derivative pricing in incomplete markets; tests of asset pricing models and associated anomalies; models of investor behavior; financial econometrics, including tests of asset pricing models and methods for high frequency data. Pre-requisites: ECO 525 and 526 (526 may be taken concurrently).
Traditional economics and finance typically use the simple "rational actor" model, where people perfectly maximize, and efficient financial markets. We will present models that are psychologically more realistic than this standard model. About 30% of the course will be devoted to economics, 70% to finance. Applications to economics will include decision theory, happiness, fairness, and neuroeconomics. Applications to finance will include theory and evidence on investor psychology, predictability of the stock market and other markets, limits to arbitrage, bubbles and crashes, experimental finance, and behavioral corporate finance
Quantitative Data Analysis in Finance
Professor/InstructorAmin Jafarian, Markus Konrad Brunnermeier
The course gives a broad introduction to the techniques of machine learning, and places those techniques within the context of computational finance. Topics include parametric and non-parametric regression, and supervised learning techniques. Methods covered include linear models, logistic regression, additive models, LASSO, kernel methods, clustering methods and applications, support vector machines and classification. We also discuss the implementation of dimension reduction techniques, including principal components analysis. Examples are taken from financial models. FIN 505 is considered the prerequisite of the course.
Entrepreneurship, Innovation and Venture Capital
Professor/InstructorAdrien Matray, Martin Cherkes
This course explores how technology-based start-up ventures are founded, managed and financed. Specific emphasis is put on the early stages of development. The goal is to offer perspectives on the "two sides of the coin": the entrepreneur's perspective and the financier's perspective (in particular the venture capitalist).
Cases in Financial Risk Management
Professor/InstructorAdrien Matray, Dong Beom Choi
Course examines the concept of risk and its mitigation, and how the ideas can be applied in the practice of risk management for financial and non-financial companies. The basic toolkit draws on economics, probability theory and statistics, and they are integrated with more advanced concepts drawn from portfolio choice, derivative securities and dynamic hedging. Overall aim of the course is to demonstrate how the main concepts have practical applications.
Asian Capital Markets
Professor/InstructorJean-Christophe de Swaan
Course explores the increasing weight of Asia in global equity financial markets and its implications, and frames the discussion in the macro-economic context of the globalization of financial markets and the evolution of the global monetary system. Course puts particular emphasis on concepts of economic development, market efficiency, and corporate governance. Discussions combine analysis of historical trends and recent data and events with insights from practical experience in Asian equity markets. Course also explicitly considers the policy decisions faced by the US and Chinese governments relative to existing global imbalances.
Professor/InstructorWilliam H. Janeway, Wei Xiong
The use economic theory and empirical evidence to study the causes of financial crises and the effectiveness of policy responses to them. Particular attention given to some of the major economic and financial crises of the past century and to the crisis that began in August 2007.