DRE 4027 Asset Pricing Theory II
The objective of this course, which is 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, this course will give the students an overview of the field of asset pricing theory and will prepare the students for independent research in both empirical and theoretical asset pricing. We will work principally in discrete-time settings, but we may also introduce some analysis in continuous time. The course will cover the central themes of choice under uncertainty, static and dynamic portfolio choice, equilibrium, efficiency, and asset prices. We will cover both consumption-based as well as production-based theories and we will look at these theories in relation to both the cross-section and the time-series dimension of asset prices.
At the end of part 2 of this course, the students will know
- how dynamic theories of asset prices explain observed characteristics of stock and bond prices
- how investor heterogeneity and market incompleteness modify the predictions from the representative or complete market setting
- information aggregation in markets with asymmetric information
- basics of option and risk-neutral pricing
Upon successful completion, students will be able to derive asset pricing implications and testable hypotheses of various models.
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.
- Habit-formation preferences
- Long-run risk
- Heterogeneous agents and incomplete markets
- Term-structure of interest rates
- REE with asymmetric information
- Introduction to option pricing
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.
|Exam category||Weight||Invigilation||Duration||Support materials||Grouping||Comment exam|
Form of assessment:
Internal and external examiner
All components must, as a main rule, be retaken during next scheduled course
|Form of assessment:||Written submission|
|Support materials:|| |
|Exam code:||DRE 40271|
|Resit:||All components must, as a main rule, be retaken during next scheduled course|
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.