Investments

Catalog description

This course is about financial markets and how financial assets (securities) are valued, used, and traded. The three main types of financial asset are considered in turn: equity (with a focus on portfolio management); debt (both Treasury and corporate); and, derivatives (call and put options and forward and futures contracts). For each type of financial asset, the course answers four questions: What is the payoff from holding the asset? Where and how is the asset traded? How is the asset valued? How is the asset used? The course introduces and expands upon several important theories for valuing assets: the CAPM and Intertemporal-CAPM for equity and corporate debt (including the Fama-French 3-factor asset pricing model); no-arbitrage pricing for Treasury debt instruments; the Black-Scholes option pricing model; and, forward-spot parity for forward contracts. Important finance researchers (Fama, Markowitz, Merton, Scholes, and Sharpe) have won Nobel prizes for developing many of the models that the course examines.