DRE 4024 Asset Pricing Theory I

DRE 4024 Asset Pricing Theory I

Course code: 
DRE 4024
Course coordinator: 
Costas Xiouros
Course name in Norwegian: 
Asset Pricing Theory I
Product category: 
PhD Finance courses
2024 Autumn
Active status: 
Level of study: 
Teaching language: 
Course type: 
One semester

The objective of this course, divided into two parts, is to undertake a rigorous study of the fundamental theories of modern financial economics regarding the role of asset markets and the determination of asset prices. Specifically, the course will provide students with an overview of asset pricing theory, preparing them for independent research in both empirical and theoretical asset pricing. The primary focus will be on discrete-time settings, though some analysis in continuous time may be introduced. The course will cover central themes such as choice under uncertainty, static and dynamic portfolio selection, equilibrium, efficiency, and asset prices. Both consumption-based and production-based theories will be explored in relation to both the cross-section and time-series dimensions of asset prices.

Learning outcomes - Knowledge

After completing part 1 of this course, students will have a solid understanding of key concepts in theoretical and applied asset pricing. This includes but is not limited to, concepts such as the absence of arbitrage, state prices, factor models, equilibrium, and efficiency. The emphasis will primarily be on comprehending this theory in a static setting, specifically in relation to the cross-section of asset prices and returns. Additionally, students will understand the fundamentals of dynamic asset pricing within endowment and production economies and learn the main questions that this field seeks to address.

Learning outcomes - Skills

Upon successful completion, students will be able to derive asset pricing implications and testable hypotheses of various models.

General Competence

Upon successful completion, students will be able to provide the economic intuition of various models in explaining asset prices and understand the challenges of the current theories.

Course content
  • Introduction to asset pricing and risk preferences
  • Static portfolio choice
  • Static asset pricing models: CAPM, APT, factor models
  • Equilibrium, efficiency, and the SDF
  • Introduction to dynamic asset pricing: CCAPM, ICAPM
  • Introduction to production-based asset pricing
Teaching and learning activities


Software tools
No specified computer-based tools are required.
Additional information



Enrollment in a PhD Programme is a general requirement for participation in PhD courses at BI Norwegian Business School.
External candidates are kindly asked to attach confirmation of enrollment in a PhD programme when signing up for a course. Other candidates may be allowed to sit in on courses by approval of the courseleader. Sitting in on a course does not permit registration for the course, handing in exams or gaining credits for the course. Course certificates or confirmation letters will not be issued for sitting in on courses.


Deviations in teaching and exams may occur if external conditions or unforeseen events call for this.

Required prerequisite knowledge


Exam category: 
School Exam
Form of assessment: 
Written School Exam - pen and paper
Exam/hand-in semester: 
First Semester
Support materials: 
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
3 Hour(s)
Exam code: 
DRE 40241
Grading scale: 
All components must, as a main rule, be retaken during next scheduled course
Type of Assessment: 
Ordinary examination
Total weight: 
Sum workload: 

A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 3 ECTS credit corresponds to a workload of at least 80 hours.