Capital Market Theory - F
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
FIN607
Course type
MSc Course
Weekly Hours
2,5
ECTS
5.0
Term
HS 2023
Language
Englisch
Lecturers
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.
Course content
The preliminary agenda includes the following topics:
- Portfolio Theory
- Asset Pricing Theory
- Derivatives
- Behavioral Finance
- Web 3.0
Class dates
| Date | Time |
|---|---|
| Tuesday, 05.09.2023 | 13:45 - 17:00 |
| Thursday, 07.09.2023 | 08:00 - 11:15 |
| Monday, 11.09.2023 | 08:00 - 11:15 |
| Thursday, 14.09.2023 | 13:45 - 17:00 |
| Monday, 18.09.2023 | 08:00 - 11:15 |
| Thursday, 21.09.2023 | 08:00 - 11:15 |
| Monday, 25.09.2023 | 08:00 - 11:15 |
| Wednesday, 04.10.2023 | 08:00 - 09:30 |
Learning outcomes
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.
Literature
Brealey, R. A., S. C. Myers, and F. Allen (2022). Principles of Corporate Finance - Global Edition, Irwin McGraw-Hill, 14th edition.Fama, E. (1965). Random Walks in Stock Market Prices. Financial Analysts Journal, September/October 1965 (reprinted January/February 1995).Cochrane, J. H. (2005). Asset Pricing, Princeton University Press.Hull, J. C. (2018). Options, Futures, and Other Derivatives, Pearson, 9th Global Edition.Black, F. and M. Scholes (1973). The pricing of options and corporate liabilities, Journal of Political Economy.Barberis, N. and R. Thaler. (2003). A survey of behavioral finance, Handbook of the Economics of Finance, 1, pp.1053-1128.Thaler, R. H. (1999). Mental Accounting Matters, Journal of Behavioral Decision Making Vol. 12, pp. 183-206Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system.Hellwig, D., G. Karlic, and A. Huchzermeier (2020). Build your own Blockchain, Springer.Werner, S., D. Perez, L. Gudgeon, A. Klages-Mundt, D. Harz, and W. J. Knottenbelt (2021). SoK (Systematization of Knowledge): Decentralized Finance (DeFi).Ordano, E., A. Meilich, Y. Jardi, and M. Araoz (2017). Decentraland - A blockchain-based virtual world, Whitepaper.Huynh, T. L. D., M. O. Rieger, and M. Wang (2022). Cross-country comparison in dishonest behaviour: Germany and East Asian countries. Economics Letters, 215, 110480.
Learningmethods
Interactive teaching
Group assignments and Q&A / tutorial session
Group assignments and Q&A / tutorial session
Exam
Moodle Quizzes(24%) and Exam (76%)
Requirements
Foundations of Finance
Total workload
150 hours