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ASSET PRICING

Program

EN IT

Updated A.Y. 2019-2020

Asset Pricing
M.Sc. Finance and Banking

Prof. Stefano Herzel


The course provides a basic knowledge of the theory of asset pricing, with an emphasis on the evaluation by arbitrage. Students will apply their knowledge to solve relevant problems in the field of asset pricing  and by implementing models on Matlab through weekly homework assignments.

Upon completion of the course students will know and understand the following topics:

Part 1: Mathematical instruments

Brownian Motion
Diffusions
Ito’s Lemma,
Stochastic Differential Equations

Part 2: Asset Pricing Theory

Basic Facts
Consumption based model
contingent claim market
discount factor
arbitrages

Part 3: Pricing by arbitrage

Option pricing in discrete time
The Black Scholes Model
Delta Hedging
Options on stock indices and currencies
Implied volatility
Grade Assessment

• Class Participation (20%)
• Homework (30%)
• Final Exam (50%)


Prerequisities
The courses of the first year (in particular Mathematics and Statistics)


Textbooks
J. H. Cochrane, “Asset Pricing”, Princeton University Press, 2005
J. Hull: ”Options, Futures, and other Derivatives”, Pearson,  (any edition is fine)