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1103695 |
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Course |
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| Advanced Asset Pricing – Fall 2020 | ||||||||||||||||||||||||||||||||||||||
Faculty |
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| Professor Claus Munk | ||||||||||||||||||||||||||||||||||||||
Course Coordinator |
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| Professor Claus Munk | ||||||||||||||||||||||||||||||||||||||
Prerequisites |
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| Participants are assumed to have a broad knowledge of finance theory at least at the level of mainstream finance texts such as “Investments” by Bodie, Kane, and Marcus, “Principles of Corporate Finance” by Brealey, Myers, and Allen, or “Financial Markets and Corporate Strategy” by Hillier, Grinblatt, and Titman. In particular, it is important that participants are acquainted with portfolio mathematics, the mean-variance analysis of optimal portfolio choice, the Capital Asset Pricing Model, the binomial and the Black-Scholes-Merton models of option pricing, and basic concepts and relations from bond markets. Furthermore, participants should have some familiarity with utility functions, basic statistics and probability theory, optimization problems, and vectors and matrices. Finally, participants are expected to have experience with continuous-time modeling using stochastic processes at a level used in many option pricing texts such as “Options, Futures, and Other Derivatives” by Hull. | ||||||||||||||||||||||||||||||||||||||
Aim |
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| To provide participants with a firm and rigorous knowledge and understanding of asset pricing models of finance. The course covers fundamental concepts, relations, and models but it also outlines some recent trends in the development of asset pricing models. Both discrete-time and continuous-time models are discussed. The course has a theoretical focus, but empirical studies and results are used for the evaluation of the theoretical models. | ||||||||||||||||||||||||||||||||||||||
Course content |
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| Introduction to multi-period financial modeling including stochastic processes; state-price deflators; preferences of individuals; optimal consumption and investment decisions of individuals; equilibrium in financial markets; basic consumption-based asset pricing; advanced consumption-based asset pricing models; factor models; the economics of the term structure of interest rates; derivatives pricing. A few additional topics may be added. | ||||||||||||||||||||||||||||||||||||||
Teaching style |
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| 44 lectures including discussion of exercises and student presentations. Students have to pass a written assignment and participate in an oral in-class presentation before being allowed to take the final exam. | ||||||||||||||||||||||||||||||||||||||
Lecture plan |
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Learning objectives |
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| The students should obtain a solid knowledge of the key concepts, methods, theories, and models in classical and contemporary asset pricing research. They should be able to understand new asset pricing research papers and position such papers in the general asset pricing literature; to evaluate the empirical validity of mainstream asset pricing models; and to develop and analyze well-motivated minor extensions of mainstream asset pricing models. | ||||||||||||||||||||||||||||||||||||||
Exam |
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| The course ends with a final oral exam. The student draws a topic from a list of topics published at least two weeks before the exam. The student then has 20 minutes to prepare an oral presentation of the topic supported by calculations, illustrations, etc. on the white/black-board. The examination lasts 20 minutes including the time the examiner needs to determine the grade and communicate it to the student. The examination begins with the student giving the prepared presentation in front of the examiner for 10-15 minutes, possibly interrupted by clarifying questions by the examiner. Towards the end of the exam, the examiner might have supplementary questions related or unrelated to the topic of the presentation. | ||||||||||||||||||||||||||||||||||||||
Other |
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Start date |
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| 03/09/2020 | ||||||||||||||||||||||||||||||||||||||
End date |
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| 19/11/2020 | ||||||||||||||||||||||||||||||||||||||
Level |
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| PhD | ||||||||||||||||||||||||||||||||||||||
ECTS |
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| 7.5 | ||||||||||||||||||||||||||||||||||||||
Language |
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| English | ||||||||||||||||||||||||||||||||||||||
Course Literature |
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Main text: Munk, C., 2013. Financial Asset Pricing Theory, Oxford University Press. (585 pages) Additional reading (subject to change): Bansal, R., Yaron, A., 2000. Risks for the long run: A potential resolution of asset pricing puzzles. Journal of Finance 59, 1481-1509. Campbell, J. Y., Cochrane, J. H., 1999. By force of habit: A consumption-based explanation of aggregate stock market behavior. Journal of Political Economy 107, 205-251. Cocco, J., Gomes, F., Maenhout, P., 2005. Consumption and portfolio choice over the life cycle. Review of Financial Studies 18, 491-533. Hong, H., Sraer, D. A., 2016. Speculative betas. Journal of Finance 71, 2095-2144. Kraft, H., Munk, C., Wagner, S., 2018. Housing habits and their implications for life-cycle consumption and investment. Review of Finance 22, 1737-1762. Longstaff, F. A., Wang, J., 2012. Asset pricing and the credit market. Review of Financial Studies 25, 3169-3215. Martin, I., 2017. What is the expected return on the market? Quarterly Journal of Economics 132, 367-433. Munk, C., 2017. Dynamic asset allocation. Lecture notes, Copenhagen Business School. Munk, C., 2019. Recursive utility in financial economics. Lecture notes, Copenhagen Business School. Munk, C., 2020. A mean-variance benchmark for household portfolios over the life cycle, Journal of Banking and Finance, forthcoming. Tsai, J., Wachter, J. A., 2015. Disaster risk and its implications for asset pricing. Annual Review of Financial Economics 7, 219-252. |
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Fee |
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| DKK 9,750 | ||||||||||||||||||||||||||||||||||||||
Minimum number of participants |
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| 5 | ||||||||||||||||||||||||||||||||||||||
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Maximum number of participants |
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| 15 | ||||||||||||||||||||||||||||||||||||||
Location |
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Time:
Location:
Thursdays weeks 36-47 (except 42) from 9:30 - 13:30 Solbjerg Plads 3, room SP D4.20
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Contact information |
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Contact information Bente S. Ramovic bsr.research@cbs.dk Tel: +45 3815 3138 |
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Registration deadline |
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| 15/07/2020 | ||||||||||||||||||||||||||||||||||||||
| Please note that your registration is binding after the registration deadline | ||||||||||||||||||||||||||||||||||||||