Module Catalogues, Xi'an Jiaotong-Liverpool University   
 
Module Code: MTH406
Module Title: Arbitrage, Equilibrium and Pricing
Module Level: Level 4
Module Credits: 5.00
Academic Year: 2019/20
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' portfolios

d. 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 Finance


Week 4: State Pricing


Week 5: Mean-Variance Frontier, Beta Representations, Conditioning Information


Week 6: Factor Pricing Models - CAPM, ICAPM and APT


Week 7: Econometrics of Asset Pricing Models and GMM


Week 8: Factor Pricing Models in Action


Week 9: Time Series Predictability, Volatility and Bubbles


Week 10: Macroeconomics and Asset Pricing


Week 11: Option Pricing


Week 12: Term Structure Models and Facts


Week 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