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What you'll learn

Understand the principles underlying investors' portfolio choices and the criteria that determine the prices of financial instruments

Understand the main functions performed by the financial markets

Analyzing how the introduction of the financial markets influences the saving choices of households

Analyzing how the introduction of the financial markets influences the investment choices of businesses in an economy without uncertainty

Skills you'll gain

Risk Management

Portfolio Management

Probability Distribution

Decision Making

Investments

Capital Markets

Financial Market

Economics

Finance

Equities

Risk Analysis

There are 6 modules in this course

Then, learners will be introduced to expected utility theory, which will provide them with the key analytical tools to study choices under uncertainty. These tools will then be used to model and analyze portfolio choices: first, learners will study the so-called canonical portfolio problem, that is, the problem of an investor who has to choose how to allocate their wealth between a safe and a risky asset; then, they will study portfolio choices that involve multiple risky assets. The analysis of portfolio choices will allow learners to characterize and determine investors’ optimal demand for risky assets, which will lay the foundation for the analysis of the Capital Asset Pricing Model, a milestone for asset pricing and financial economics. The analysis of the CAPM will finally teach learners how to characterize equilibrium returns and asset prices in financial markets, also understanding the key forces that govern these key variables.

Week 2 - Choice under uncertainty

Week 3 - Contingent claim markets

Week 4 - Canonical portfolio problem

Week 5 - Mean-Variance analysis

Week 6 - The Capital Asset Pricing Model (CAPM)