Econ 653. Financial Economics

• Credits: 3.
• Prerequisites: 603, 672. Recommended: 674, Stat 551.

Review of decision-making under uncertainty. Portfolio Theory. Theoretical foundations of asset valuation models: capital asset pricing model (CAPM), arbitrage pricing theory (APT), representative agent models, pricing of derivative securities. Complete and incomplete asset markets, credit markets, financial intermediaries, the role of government in the financial sector. Market frictions, crashes, bubbles. Applications of asset valuation models, with emphasis on their testable implications.