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Capital Market Theory

This course is based on the Stochastic Discount Factor (SDF) approach, from which different one period and continuous time capital market models will be derived. The course lays the foundations of WHU's Master in Finance and entails comparatively advanced quantitative methods. Students attending the course should be interested in continuous time finance, stochastic calculus, and mathematical proofs. Each of the steps will be carefully developed and illustrated by applications. Moreover, talks by selected practitioners will shift the rigorous development of financial models into relevant practical applications. The basic textbook for the course will be Cochrane (2005), which requires a considerable amount of quantitative ability and interest on the student's side. All models, including contingent claims models and also inter-temporal models, can be derived out of the Euler equation by the SDF approach.
Course code
Course type
MSc Course
Weekly Hours
HS 2020
Prof. Dr. Markus Rudolf
Please note that exchange students obtain a higher number of credits in the BSc-program at WHU than listed here. For further information please contact directly the International Relations Office.
The preliminary agenda includes the following topics:
  1. Portfolio Theory
  2. Derivatives
  3. Asset Pricing
  4. Block Chains
  5. Behavioral Finance
Date Time
Monday, 07.09.2020 08:00 - 09:30
Tuesday, 08.09.2020 15:30 - 18:45
Wednesday, 09.09.2020 08:00 - 09:30
Tuesday, 15.09.2020 15:30 - 18:45
Wednesday, 16.09.2020 08:00 - 09:30
Monday, 21.09.2020 08:00 - 09:30
Tuesday, 22.09.2020 15:30 - 18:45
Wednesday, 30.09.2020 17:15 - 18:45
Thursday, 01.10.2020 08:00 - 09:30
Friday, 02.10.2020 11:30 - 15:15
Wednesday, 07.10.2020 08:00 - 09:30
Thursday, 08.10.2020 17:15 - 18:45
Stochastic Discount Factor Approch, Stochastic Calculus
Brealey, Richard A., Stewart C. Myers and Allen, Franklin (2019): “Principles of Corporate Finance”, Irwin McGraw-Hill, 13th edition.John C. Hull (2018), "Options, Futures, and Other Derivatives", Pearson, 9th Global EditionCochrane, John H. (2005), “Asset Pricing”, Princeton University Press, chapter 1Nakamoto, S. (2008): “Bitcoin: A peer‐to‐peer electronic cash system”Hellwig, Daniel, Goran Karlic, and Arnd Huchzermeier (2020): “Build your own Blockchain”, SpringerBarberis, N. and Thaler, R., 2003. A survey of behavioral finance.Handbook of the Economics of Finance, 1, pp.1053-1128.
Interactive teaching
Assignment with tutorial session
Moodle Quizzes(24%) and Exam (76%)
Foundations of Finance
150 hours
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