LUISS

Syllabus

COURSE OBJECTIVES

  • To introduce students in a rigorous but intuitive way to core topics in finance. The course intends to define fundamental principles for asset pricing and show their practical implications within financial markets. Thus, the course describes the role of institutions and instruments in financial markets, presents modern portfolio theory and analyzes the characteristics and properties of the most important classes of financial assets.

COURSE CONTENT

  • Introduction to Financial Instruments and Securities Markets: The Role of Financial Assets and Financial Markets; Separation of Ownership and Management; The Role of Financial Institutions; Characteristics of Securities and Securities Markets.

Reading: Bodie, Kane and Marcus, Chapters 1 to 3.

  • Portfolio Theory: Risk and Return; Historical Risk and Return; Diversification; Portfolio Selection; TheMarket Portfolio; the CAPM and its Implications; Empirical Evaluation of the CAPM, The APT and Multi-factor Models; Definitions and Implications of Market Efficiency; Empirical Evaluation of Market Efficiency; Mutual Funds Performance and Market Efficiency.

Reading: Bodie, Kane and Marcus, Chapters 5 to 8.

  • Fixed Income Markets: Institutions and Characteristics; The Present Value; Bond Prices and Interest Rates; The Term Structure of Interest Rates; Theories of the Term Structure of Interest Rates; Risk and Bond Values.

Reading: Bodie, Kane and Marcus, Chapters 10 and 11.

  • Equity Markets: Characteristics; Dividends and Equity Valuation; Common Ratios; Investment and Growth Opportunities.

Reading: Bodie, Kane and Marcus, Chapter 13.

  • Derivative Markets: The Characteristics of Futures and Forward Contracts; Futures Markets; The Arbitrage Principle; Forward and Futures Prices; Characteristics of Options and Options Markets; Option Basic Relations; Strategies Involving Options; The Binomial Model and Risk-Neutral Valuation; Warrants and Convertibles.

Reading: Bodie, Kane and Marcus, Chapters 15 to 17.

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