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Updated A.Y. 2020-2021

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 the theoretical models (often using Matlab) through homework assignments.

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

Part 1: Mathematical instruments

  1. Brownian Motion
  2. Diffusions
  3. Ito’s Lemma,
  4. Stochastic Differential Equations

Part 2: Asset Pricing Theory

  1. Basic Facts
  2. Consumption based model
  3. contingent claim market
  4. discount factor
  5. arbitrages

Part 3: Pricing by arbitrage

  1. Option pricing in discrete time
  2. The Black Scholes Model
  3. Delta Hedging
  4. Options on stock indices and currencies
  5. Implied volatility

Grade Assessment

The final grade will be determined by a final exam. Active participation to the lectures will be rewarded by bonus points.

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

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