Asset pricing and financial contracts

A.A. 2019/2020
12
Crediti massimi
80
Ore totali
SSD
SECS-P/01
Lingua
Inglese
Obiettivi formativi
Module Asset Pricing
The course aims to provide a good knowledge of the core principles and topics of modern asset pricing theory. It presents key concepts, relations, and models of asset pricing to develop a sound understanding of the pricing of financial assets under realistic conditions of a multiperiod stochastic environment with incomplete markets. The course covers various theories from the Stochastic Discount Factor Theory to the Consumption Capital Asset Pricing Model and discusses practical issues such as the equity premium puzzle.

Module Financial Contracts
This introductory course in financial contracts covers the basic contract theory as well as applications to financial contracts theory. It provides students with a theoretical framework for understanding the origin and the characteristics of current financial contracts and also with the knowledge needed for taking more advanced courses in microeconomics and finance.
Risultati apprendimento attesi
Module Asset Pricing
Students are expected to acquire the knowledge of Asset Pricing Theory. In particular, they will be able to understand: i) The different theories of Asset Pricing (Stochastic Discount Factor Theory, Capital Asset Pricing Model, Intertemporal CAPM, Arbitrage Theory, etc.); The pricing of financial assets in complete and incomplete markets and their determinants (risk factors, risk aversion and time preferences); iii) risk premia and default premia. Students will develop the basic skills for asset pricing analysis with special attention to the modeling of the theoretical principles.

Module Financial Contracts
On completion of the course the student should:
- be familiar with the fundamental assumptions underlying basic contract theory and asymmetric information theory;
- know how to explain the main features of actual financial contracts by contract theory and asymmetric information theory;
- explaining the role of banks by adopting contract theory and asymmetric information theory;
- be prepared to study microeconomics and finance at a more advanced level.
Programma e organizzazione didattica

Edizione unica

Responsabile
Periodo
Secondo trimestre
Prerequisiti
Although there are no formal prerequisites, students are strongly recommended to take Decision Theory and Behavioural Economics.
For the Asset Pricing module Time Series Analysis, and Money and Finance are also recommended.
Modalità di verifica dell’apprendimento e criteri di valutazione
For the Asset Pricing module:
Written exam (approximately 1 hour and 30 minutes). The exam covers all the topics presented during lectures and it consists of a series of open-ended questions which may include calculations and/or explanation and/or technical analysis.

For the Financial Contracts module:
Written exam (approximately 1 hour). The exam covers all the topics presented during lectures and it consists of a series of questions and exercises.
Module Asset Pricing
Programma
The course provides an introduction to the modern theory of asset pricing within discrete-time models. It presents key concepts, relations, and models of asset pricing to develop a sound understanding of the pricing of financial assets in a multi-period stochastic environment with incomplete markets.
List of Topics
· Financial markets and institutions
· The Euler Equation and the Stochastic Discount Factor (SDF)
· Risk aversion and risk premium
· Mean Variance Frontier and Beta Representations
· The relationship between SDF, Betas, and Mean-Variance Frontiers
· The Capital Asset Pricing Model (CAPM)
· The Intertemporal and Consumption-Based CAPM
· The Arbitrage Pricing Theory
· The Equity Premium Puzzle
· Sovereign bond yield spreads
Metodi didattici
Lectures and review sessions.
Lectures present the theory and provide examples of practical applications. Policy issues and solutions are also discussed. Review sessions provide the instruments to solve exercises on the topics addressed in the lectures.
Materiale di riferimento
Textbook
Cochrane, John H. "Asset Pricing". Revised edition, Princeton University Press, 2005.
Chapters: 1-9 and 21.

Other references
Campbell, John Y., "Financial Decisions and Markets - A Course in Asset Pricing", Princeton University Press, 2017.
Danthine Jean-Pierre and John B. Donaldson, "Intermediate Financial Theory", 3ed., Elsevier, 2014
Huang, Chi-Fu and Robert H. Litzenberger, "Foundations for Financial Economics", Prentice Hall (Elsevier Science Ltd.), 1988.
Pliska, Stanley R. "Introduction to Mathematical Finance", Blackwell, 1997.
Module Financial Contracts
Programma
The course focuses on the case of imperfect information that is discussed in relation with the problems of moral hazard, adverse selection and signaling. The analytical tools developed in the first part are then used to analyze issues related to credit and insurance markets.

Theory
· The principal-agent model.
· Contractual design under perfect information.
· Contractual design under imperfect information (I): moral-hazard.
· Contractual design under imperfect information (II): adverse selection.
· Contracts and signaling.

Applications
· Insurance.
· The lender-borrower relationship.
· Financial intermediation.
· Banks as delegated monitors.
· Credit rationing and the role of collateral.
Metodi didattici
Lectures
Lectures present the theory and provide examples of practical applications. Policy issues are also discussed.
Materiale di riferimento
Macho-Stadler, I. and J.D. Pérez-Castrillo, "An Introduction to the Economics of Information: Incentives and Contracts", Oxford University Press, last edition.

Freixas, X. and J.C. Rochet, "Microeconomics of Banking", MIT Press, 2008 (second edition).
Moduli o unità didattiche
Module Asset Pricing
SECS-P/01 - ECONOMIA POLITICA - CFU: 6
Lezioni: 40 ore

Module Financial Contracts
SECS-P/01 - ECONOMIA POLITICA - CFU: 6
Lezioni: 40 ore
Docente: Colombo Stefano

Docente/i
Ricevimento:
Ricevo Martedì 3 Marzo ore 14-16
DEMM, via Conservatorio 7, stanza 5 secondo piano