The course covers several advanced topics in asset pricing, trading-off risks and return, and portfolio optimization. More precisely, students will first analyze two relevant extensions of the Capital Asset Pricing Model (CAPM) and learn how to determine the corresponding equilibrium in financial markets. Next, they will learn how to estimate empirically the risk-return relationship predicted by the Capital Asset Pricing Model. Students will also analyze two pricing models alternative to the CAPM. In the Arbitrage Pricing Theory, they will learn how to determine assets expected returns based on multiple risk factors and absence of arbitrage opportunities. In the Consumption Capital Asset Pricing Model, instead, they will learn how to solve the investors' joint consumption/investment decision problem and how to compute the equilibrium asset prices and expected returns in a dynamic pure exchange economy. Finally, the course concludes with a focus on the pricing of fixed income instruments.
Introduction
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Skills You'll Learn
Financial Analysis, Fixed Asset, Time Series Analysis and Forecasting, Financial Market, Risk Modeling, Regression Analysis, Asset Management, Investments, Capital Markets, Risk Analysis, Estimation, Derivatives, Securities (Finance), Return On Investment, Equities, Portfolio Management, Statistical Methods, Finance
From the lesson
Week 3 - The Arbitrage Pricing Theory (APT)
By the end of this week you will learn how to determine assets expected returns based on multiple risk factors and absence of arbitrage opportunities
Taught By
Giovanni Walter Puopolo
Associate Professor of Economics