Module Catalogues, Xi'an Jiaotong-Liverpool University

Module Code: MTH406
Module Title: Arbitrage, Equilibrium and Pricing
Module Level: Level 4
Module Credits: 5.00
Semester: SEM2
Originating Department: Mathematical Sciences
Pre-requisites: N/A

 Aims This course gives an introduction to the theory part of Research methods in Finance for MSc students. It focuses on the foundations of the equilibrium models of asset pricing theory. It introduces the students to the relevant modeling techniques for asset pricing. Three pricing principles are considered: non-arbitrage, individual optimality, and equilibrium. Many of the models are treated at three different levels as one-period, multi-period and continuous time models. We shall comment on some empirical evidence and on how these theories are used in financial practice.
 Learning outcomes On the completion of this module students will be able to:a. Understand and apply the forms of Capital Asset Pricing Model (CAPM), the linear factor model arising from the Arbitrage Pricing Theory (APT), and contingent claims pricing.b. Understand and apply theoretical and practical aspects of the Black and Scholes model.c. Be able to price fixed income securities for investing, market-making or speculating, familiar with quantitative tools used to value bonds and manage bonds' portfoliosd. Understand and apply the applications of expected utility theory and state prices, pricing kernels, and risk-neutral probabilities
 Method of teaching and learning
 Syllabus Week 1: A Quick Introduction to Continuous-Time Stochastic Models Week 2: Introduction and Overview, Facts, and Basic Theory Week 3: Classic Issues in FinanceWeek 4: State PricingWeek 5: Mean-Variance Frontier, Beta Representations, Conditioning Information Week 6: Factor Pricing Models - CAPM, ICAPM and APTWeek 7: Econometrics of Asset Pricing Models and GMMWeek 8: Factor Pricing Models in ActionWeek 9: Time Series Predictability, Volatility and BubblesWeek 10: Macroeconomics and Asset PricingWeek 11: Option PricingWeek 12: Term Structure Models and FactsWeek 13: Portfolio Theory
Delivery Hours
 Lectures Seminars Tutorials Lab/Prcaticals Fieldwork / Placement Other(Private study) Total Hours/Semester 39 13 98 150

## Assessment

 Sequence Method % of Final Mark 1 Assignment 25.00 2 Class Test 15.00 3 Final Exam 60.00
 Module Catalogue generated from SITS CUT-OFF: 12/10/2019 12:07:25 AM