FIN 920 Theory of Finance (Fall 2015)

Course level: PhD

Professor: David Brown

Course description:

This is a first course in financial theory. It is aimed at those who will do financial research either in industry or in academia. Although it is a stand-alone entity, its value is fully gained only if you continue your study at a similar or higher level, say, in other finance or economic Ph.D. level courses. 

This course introduces the principles of financial research. Topics include: utility maximization, risk aversion, stochastic dominance, investor preferences, states of the world and state prices, pricing kernels, stochastic discount factors, option pricing, arbitrage, CAPM and asset pricing tests. As the title suggests, its nature is theoretical. In part, this means that you learn by the process of deriving or proving results from fundamental principles.

To do well in this course requires an attention to detail, a facility for logical reasoning and prior training in economics, calculus, linear algebra, probability theory, and statistics. 


Discussion section handouts

ClassDate Topics PDF
   1   09/08/2015    Risk neutral pricing; no arbitrage      Class1.pdf
 209/15/2015 Stochastic discount factor    Class2.pdf
 309/22/2015 Stochastic discount factor (2)Class3.pdf
 409/29/2015  Market completenessClass4.pdf
 510/06/2015 Precautionary savings  Class5.pdf 
 610/13/2015 Minimum variance frontier  Class6.pdf 
 710/20/2015 Yield to maturity; uncertainty  Class7.pdf 
 810/21/2015 Uncertainty Class8.pdf 
 911/03/2015 Bliss-point preferences; net supply of assets Class9.pdf
 1011/10/2015 Midterm exam solutions Midterm_solutions.pdf 
 1111/17/2015 Mutual fund separation; Arrow-Debreu markets  Class11.pdf 
 1211/24/2015 Multi-period models  Class12.pdf 
 1312/01/2015 Ito's lemma  Class13.pdf 
 1412/08/2015 Differential equations  Class14.pdf 
  15 12/14/2015 Continuous time optimisation Class15.pdf