- The course is rather intense. There are both basic theoretical concepts and elaborate formal models of bond and equity markets as inputs to the course’s content. It involves considering both classic and recent research contributions to the area. This is to give students a solid and comprehensive understanding of the fundamentals and evolution of the Theory of Finance.
- To improve students’ understanding of basic theoretical concepts of the Theory of Finance;
- To present various techniques for appropriate pricing and / or detecting mispricing in bond and equity markets;
- To discuss management of uncertainty in pay-offs and portfolio optimization strategies;
- To guide students through applications of the Theory of Finance in preparation for future independent quantitative research.
- Market for discount and coupon bonds: basic assumption of bond pricing, alternative bond pricing techniques, sources of risk and hedging strategies
- Arbitrage and price consistency in bond markets: empirical issues
- Arbitrage and price consistency in bond markets: theoretical issues
- Market for contingent claims: the SDF model, risk-neutral valuation, and contingent claims valuation
- SDF and discount bond valuation
- Expected utility and risk aversion
- Portfolio Theory: expected utility maximization, the mutual fund theorem, the Sharpe portfolio separation theorem, portfolio choice with and without a safe asset; application to the mutual fund industry
- Capital Asset Pricing Model
- Alternative asset allocation strategies
- 1home assignment
- 2 home assignment
- Final testThe final test is scheduled for 17.06 at 18:30. It will last for 1 hour and 20 minutes. The final test is held in a written form on platform Moodle (https://it.hse.ru). The exam will be proctored on platform Examus (https://hse.student.examus.net). Students are advised to access the system 15 minutes prior to the starting time of the final test to make sure that nothing is out of order. Examus provides an opportunity for students to check if their computers / laptops meet technical requirements. Technical requirements are outlined here: https://elearning.hse.ru/data/2020/05/07/1544135594/Технические%20требования%20к%20ПК%20студента.pdf . To participate in the final test a student must: 1) switch on the camera and the microphone, 2) identify himself / herself by placing an identification document with photo in front of the screen for 20 seconds right after the final test starts at 18:30. During the final test students are allowed to use lecture notes and tutorial notes for Theory of Finance and textbooks and articles which are reference for Theory of Finance. Students are allowed to use non-financial calculators. During the final test students are not allowed to contact anyone nearby or online through any means of online communication (i.e. social networks). Students are not allowed to use computers / laptops / cellphones etc. to access internet in an attempt to find answers to questions of the final test. (Mind it that Examus will record not only the view of the camera but also the view of the screen.) Similarly, students are not allowed to use Excel and the OS-embedded calculator or the calculator in their cellphones. Students are not allowed to talk, to turn right / left / around and to leave. Violations of these rules will be punished by reducing the grade for the final test. If a student is disconnected form the system for more than 5 minutes, the final test for this student is nullified. The final test will be retaken in two possible ways depending on whether the constrains on distance communication are retained or not. If not, the final test will be retaken in a classroom in a written form and in a closed-book format (the use of lecture notes, tutorial notes, textbooks, formula sheets etc. is not allowed). Otherwise the testing procedure will be similar to the testing procedure for the final test held on 17.06.
- Interim assessment (4 module)0.2 * 1home assignment + 0.2 * 2 home assignment + 0.6 * Final test