LUISS

Syllabus and Course Guidelines

Deterministic Cash Flows

The basic theory of interest

Cash Flows
Investments and Markets
Typical Investment Problems
Principal and Interest
Present Value
Present and Future Value of Streams
Internal Rate of Return
Evaluation Criteria

Fixed-Income Securities

The Market for Future Cash
Value Formulas
Bond details
Yield
Duration
Immunization
Convexity.

The Term Structure of Interest Rates

The Yield Curve
The Term Structure
Forward Rates
Expectation Dynamics
Running Present Value
Floating Rate Bonds
Duration
Immunization

Applied Interest Rate Analysis

Capital Budgeting
Optimal Portfolios
Dynamic Cash Flow Processes
Optimal Management
Valuation of a firm.

Single-Period Random Cash Flows

Mean-Variance Portfolio Theory

Asset Return
Random Variables
Random Returns
Portfolio Mean and Variance
The Feasible Set
The Markowitz Model
The Two-Fund Theorem
Inclusion of a Risk-Free Asset
The One-Fund Theorem

The Capital Asset Pricing Model

Market Equilibrium
The Capital Market Line
The Security Market Line
Investment implications
Performance evaluation
Factor models
The CAPM as a Factor Model
Arbitrage Pricing Theory
Data and Statistics
Utility Functions
Risk Aversion
Utility Functions and Mean-Variance Criterion
Linear Pricing
Portfolio choice

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