The course requires a basic knowledge of linear algebra (linear space, linear map, basis, inversion, eigenvectors and eigensystems), calculus (differential analyses of function of many real variables and static optimization) and, to a lesser extent, probability theory. Some basic knowledge of the theory of choice under uncertainty (utility theory) and economic equilibrium are in general given for granted and only cursorily reviewed.

Delivery: face to face.

Larning activities:

• attending lectures,
• individual study,
• assignments.

Attendance: advised.

Teaching methods:

• lectures,
• exercises and assignment correction.

General equilibrium, no arbitrage in riskless economies, real interest rate and the yield curve. Arbitrage in security markets, state prices, complete and incomplete markets, valuation functional and the fundamental theorem of finance. Choices under uncertainty, expected utility theory and risk aversion. Portfolio choices, optimal portfolio with multiple risky assets. General equilibrium under uncertainty. Pricing kernel and mean-variance analysis. OPTIONAL: behavioral finance, asset prices under ambiguity, evolutionary finance and the market selection hypothesis.

Textbooks:

• Principles of Financial Economics, S.F. LeRoy and J. Werner (2nd edition)
• Foundations of Financial Markets and Institutions, Fabozzi, Modigliani and Jones

Further references and Optional readings:

• Microeconomic Theory, A. Mas-Colell, M. D. Whinston, and J. R. Green
• Quantitative Financial Economics, K. Cuthbertson and D. Nitzsche 
• Financial Economics, T. Hens and M. O. Rieger 
• Ambiguity and Asset Markets, L. G. Epstein and M. Schneider, NBER paper;
• Options, Futures and Other Derivatives, J. C. Hull (7th ed.)
• The Ascent of Money: A Financial History of the World, Niall Ferguson
• Guide to the Financial Markets, The Economist

Further material can be found here.

Check "Financial Economics" entries for the lecture timetable and locations in the calendar.