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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 2022
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. Asset Pricing Theory
  3. Derivatives
  4. Behavioral Finance
  5. Web 3.0
Date Time
Wednesday, 07.09.2022 08:00 - 11:15
Thursday, 08.09.2022 08:00 - 11:15
Friday, 09.09.2022 08:00 - 09:30
Tuesday, 13.09.2022 08:00 - 11:15
Wednesday, 14.09.2022 15:30 - 18:45
Thursday, 15.09.2022 08:00 - 11:15
Wednesday, 21.09.2022 15:30 - 18:45
Tuesday, 27.09.2022 08:00 - 11:15
Understanding of portfolio theory concepts, such as the CAPM; Data Work Skills; Asset Pricing & Stochastic Discount Factor Approach; Stochastic Calculus; Derivatives and Different Option Pricing Models; Awareness of behavioral / psychological biases and respective impact on finance and investment practice; Understanding of Web 3.0 and Blockchain Applications in Finance.
Interactive teaching
Group Assignments and Q&A / tutorial session
Moodle Quizzes(24%) and Exam (76%)
Foundations of Finance
150 hours
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