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Regular version of the site
Bachelor 2022/2023

Asset Pricing and Financial Markets

Type: Elective course (Data Science and Business Analytics)
Area of studies: Applied Mathematics and Information Science
When: 4 year, 1-3 module
Mode of studies: offline
Open to: students of one campus
Instructors: Veronika Vinogradova
Language: English
ECTS credits: 7
Contact hours: 104

Course Syllabus

Abstract

This course is aimed at students who wish to understand how financial markets work and how securities are priced. Using present value techniques, it gives a theoretical treatment of bond and stock valuation including portfolio theory and a development of the Capital Asset Pricing Model. The concept of financial market efficiency is introduced, and evidence for efficiency evaluated. Finally, there is a presentation of derivative pricing using absence of arbitrage arguments. The course is based on lectures, seminars, team work and self-study. “Asset pricing and Financial markets” is a two-semester course.
Learning Objectives

Learning Objectives

  • Сomprehending the no-arbitrage condition as a key valuation principle
  • Providing students with a thorough grounding in asset pricing
  • Developing students’ skills in applying pricing methods to realistic scenarios
  • Provide a critical overview of the research on financial markets efficiency
  • Developing students’ understanding of how security markets operate.
Expected Learning Outcomes

Expected Learning Outcomes

  • Outline the purpose of derivative products; know the most common ones
  • Present, explain and apply the Capital Asset Pricing model for computing expected stock returns.
  • Apply Black-Scholes formula
  • Apply present value techniques to price stocks and bonds
  • Be able to put the notion of pricing by replication under absence of arbitrage in practice for simple contracts like forwards and in the binomial tree model
  • Define the EMH and explain what it means in practice
  • Describe the important differences between stock, bond and derivative securities.
  • Employ mathematical tools to compute risk and return for portfolios of securities.
  • Evaluate portfolio choice problems.
  • Explain how to price assets using both present value and absence of arbitrage methods.
  • Explain under which conditions efficiency may not fully hold
Course Contents

Course Contents

  • Introduction to the course and its basic principles
  • Understanding and pricing government bonds
  • Valuation of stocks
  • Risk, returns and stock portfolios
  • Portfolio theory and the CAPM
  • Market efficiency
  • Derivative securities and derivative pricing
Assessment Elements

Assessment Elements

  • non-blocking Quizzes
  • non-blocking Cases
  • non-blocking Test
  • non-blocking Seminars
  • non-blocking Midterm exam
  • non-blocking Final exam
Interim Assessment

Interim Assessment

  • 2022/2023 2nd module
    0.25 * Quizzes + 0.2 * Test + 0.3 * Midterm exam + 0.25 * Seminars
  • 2022/2023 3rd module
    Final grade = 0,1 Quizes + 0,05 Test + 0,15 Seminars + 0,1 Cases + 0,2 MidTermExam + 0,4 FinalExam
Bibliography

Bibliography

Recommended Core Bibliography

  • Corporate finance, Berk, J., 2014