SemesterFall Semester, 2018
DepartmentMA Program of International Business, First Year PhD Program of International Business, First Year MA Program of International Business, Second Year PhD Program of International Business, Second Year
Course NameFinancial Economics (I)
InstructorYEN YU-MIN
Credit3.0
Course TypeElective
Prerequisite
Course Objective
Course Description
Course Schedule




























































































































































Week



Course Theme



Content and reading assignment



Activity and homework



Lecture hours



Preparation time



1 (19-09-18)



Course introduction



Course introduction



-



3



2



2 (26-09-18)



Utility and risk aversion



Utility functions, risk aversion and certainty equivalent



-



3



2



3 (03-10-18)



Utility and risk aversion



Linear risk tolerance, utility and wealth moment



Exercise 1



3



2



4 (10-10-18)



Portfolio choice problem



First order condition, single risky asset, multiple risky asset, CARA normal model



-



3



2



5 (17-10-18)



Portfolio choice problem



Mean variance preference, linear risk tolerance



Exercise 2



3



2



6 (24-10-18)



Stochastic discount factors



Concept of SDFs, Arbitrage, the law of one price and existence of SDFs



-



3



2



7 (31-10-18)



Stochastic discount factors



Complete market and uniqueness of the SDF, risk-neutral probabilities



-



3



2



8 (07-11-18)



Stochastic discount factors



Orthogonal projection method, Hansen-Jagannathan bounds, hedging and optimal portfolio with quadratic utility



Exercise 3



3



2



9 (14-11-18)



Mid-term exam week



-



-



3



2



10 (21-11-18)



Concept of equilibrium and efficiency



Pareto equilibrium, competitive equilibria, linear risk tolerance.



-



3



2



11 (28-11-18)



Concept of equilibrium and efficiency



Graphic analysis, mean-variance frontier of risky asset and with the risk-free asset



Exercise 4



3



2



12 (05-12-18)



Mean-variance portfolio optimization



orthogonal projection method, frontier return, SDFs



-



3



2



13 (12-12-18)



Mean-variance portfolio optimization



orthogonal projection method, frontier return, SDFs



Exercise 5



3



2



14 (19-12-18)



Beta pricing models



CAPM, General factor models, Jensen’s alpha and performance evaluation



-



3



2



15 (26-12-18)



Beta pricing models



Statistical factors, arbitrage pricing theory, empirical performance of popular models



Exercise 6



3



2



16 (02-01-19)



Representative agent in financial economics



Pareto optimality implies a representative investor, linear risk tolerance, consumption based CAPM Option pricing model



Exercise 7



3



2



17 (09-01-19)



Asymmetric information



No-trade theorem, normal-normal updating, fully revealing equilibria, Grossman-Stiglitz mode



Exercise 8



3



2



18 (16-01-19)



Final exam



Final exam



-



3



2



Teaching Methods
Teaching Assistant

NA


Requirement/Grading

Exercises (30%) and Final exam (70%)


Textbook & Reference

  1. Back, K. (2017): “Asset Pricing and Portfolio Choice Theory”, 2nd Edition, Oxford University Press (The course will closely follow Chapter 1 to 7 and Chapter 22 of this book).

  2. Cochrane, J. H. (2005): “Asset Pricing”, Revised Edition, Princeton University Press.

  3. Elton, J. et al., (2014): “Modern Portfolio Theory and Investment Analysis”, 9th Edition, Wiley.


Urls about Course
Websites about text books: 1.https://www.amazon.com/Portfolio-Financial-Management-Association-Synthesis/dp/0190241144/ref=sr_1_1? ie=UTF8&qid=1534654450&sr=8-1&keywords=asset+pricing+and+portfolio+choice+theory 2. https://www.amazon.com/Asset-Pricing-John-H-Cochrane/dp/0691121370/ref=sr_1_1?s=books&ie=UTF8&qid=1534654526&sr=1-1&keywords=asset+pricing 3. https://www.amazon.com/Modern-Portfolio-Theory-Investment-Analysis/dp/1118469941/ref=sr_1_1?s=books&ie=UTF8&qid=1534655030&sr=1-1&keywords=modern+portfolio+theory+and+investment+analysis
Attachment

Financial_Economics_I_course syllabus_2018.pdf
lecture0.pdf