Financial Economics

The course starts from a generic analysis of consumption and portfolio choice, and their connection to the absence of “free lunches” in financial markets. From there, it moves towards the concept of an equilibrium that is induced from supply and demand of financial assets. It then develops the notions of complete and incomplete markets. In the second part of the course, we deepen our understanding of risk in general, and discuss expected utility theory, risk aversion, and risk compensation leading to the celebrated Pratt theorem. Time allowing, we also discuss more advanced and realistic notions of uncertainty and ambiguity and their implications for decision problems and financial markets. 

The course aims at introducing students to the connection of decision problems to financial markets. The desired learning outcome is a solid understanding of the most fundamental concepts that are important for the study of asset prices. 

In presence

The course will alternate between theory and practice sessions.

The course will feature a mid-term, and a final written exam.