Objectives

The objective of this course is to develop an understanding of the institutional structure and fundamental concepts of asset valuation in financial markets. Some analytical tools will be developed to study the valuation of different types of securities.

The course is structured in three parts. The first part deals with the institutional background of security markets. Particular emphasis is placed on fixed income markets. Second, the concepts of market microstructure are introduced. For example, we examine the questions: What is liquidity and how is it created. The final pare of the course examines the recent advances in asset valuation (asset pricing theory).

Selected Topics

-The institutional structure of government securities markets
-Borrowing, lending, and short-selling securities
-The term structure of interest rates
-The foreign exchange market
-The stock market
-Asymmetric information
-Assessing risk tolerance of investors 
-Measuring risk exposure of securities
-Risk and expected return in equilibrium
-Asset allocation techniques

Bodie, Kane and Marcus, Investments.

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