Foundations of Finance

Catalog description

For graduate students and advanced undergraduates. This course teaches the foundations of finance. Topics include internal rate of return and net present value, Black-Scholes option pricing, portfolio diversification and the Capital Asset Pricing Model, relationships between risk and return, market efficiency, and the valuation of derivative securities. Much of the analysis will build on the Arrow-DeBreu state preference model. Next, adverse selection and moral hazard in contracting and the design of auctions will be discussed. Towards the end of the course applied topics such as bank capital regulation, sovereign debt, pension funds, university endowments, and the evaluation of private equity performance and fees will be discussed, depending on time. Ability to use spreadsheets, and basic probability and statistics concepts including random variables, expected value, variance, covariance, and simple estimation and regression are recommended. Approved field credit for the ECON BA and Minor Programs. NOTE: Students who complete ECON 135 may not also count ECON 140 or ECON 141 toward the Economics BA or Minor requirements, as the content overlaps.