Students will be able to understand the fundamental theorem of asset pricing and the consumption-based asset pricing model.
Students will be able to understand the issues surrounding identification in empirical research.
Simple Stochastic Processes
Students will be able to specify a simple stochastic process for dividends and solve the corresponding PDE for price.
Students will be abel to derive the Black-Scholes PDE.
Understand basic principles of market efficiency.
Understand the mean-variance mathematics as it relates to portfolio optimization.
Understand factor models and be able to implement time series and cross-sectional tests of asset pricing models used in financial research.