Financial Economics

Catalog description

This course builds the analytical and quantitative tools necessary to study the links between economics and finance, both in theory and in practice. It starts with the microeconomics of individual decision-making in a dynamic environment in which uncertainty and information about that uncertainty change over time, then adds the macroeconomics of how financial markets intermediate those decisions across economic agents and across time. The course combines the analytical tools needed to think clearly about uncertainty, dynamic optimization and equilibrium, with the quantitive tools of measurement, statistics, and computational algorithms using both Matlab and Python, needed to relate theoretical concepts to real-world data. Topics include: the role of preferences in dynamic consumption and portfolio choice; equilibrium asset pricing with both complete and incomplete markets; models of multi-period bond pricing; options and derivatives; and models of the equity premium.