This course will focus on the financial theory of asset pricing. While this course will be broad in scope and will cover many different topics relating to finance, a particular emphasis will be placed on topics related to financial markets. The primary topics covered in the class include present value, asset valuation, expected utility, portfolio selection, and the trade-off between risk and return.

Learning Objectives

At the end of the term, students will be able to:

  • Define, model and price various financial instruments, including stocks and bonds
  • Construct optimal portfolios, based on mean-variance efficiency and utility theory, using probability and optimization
  • Use the trading lab to research stocks and select a portfolio of stocks in one sector for semester-long “stock pitching” project.

Measurable Outcomes

  • Price stocks, bonds and work with the term structure of interest rates.
  • Use portfolio theory to select mean-variance optimal portfolios.
  • Provide sector analysis and insight on individual stocks within a sector.
  • Improve professional presentation skills with in class “stock pitches.”

12 Credits
Prerequisites: 10.004 Advanced Math II, 40.001 Probability (or 30.003/50.034 Introduction to Probability and Statistics)

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