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2013/2014  KAN-OE12  Asset Pricing

English Title
Asset Pricing

Course information
Language English
Exam ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Semester
Course period Autumn
Time Table Please see course schedule at e-Campus
Max. participants 50
Study board
Study Board for MSc in Advanced Economics and Finance
Course coordinator
  • Kristian Miltersen - Department of Finance (FI)
Main academic disciplines
  • Finance
  • Economics, macro economics and managerial economics
Last updated on 02-08-2013
Learning objectives
Students are required to:
  • link utility, expected return, risk aversion, and portfolio choice
  • perform mean-variance portfolio analysis
  • derive and apply advanced capital asset pricing models and factor models
  • derive and apply multi-period consumption/investment problems and their asset pricing implications
  • link mutual fund flow and fund performance
Course prerequisites
This is a mandatory course for the MSc in Advanced Economics and Finance. It is assumed that students have knowledge similar to the entry requirements for this programme. The course has 60 confrontation hours and there is a high level of interaction betw. lecturer and students, and in general a high work load.

To sign up send a 1-page motivational letter, a 1-page CV, and a grade transcript to oecon.eco@cbs.dk no later than14 May 2013. Please also remember to sign up through the online registration
Prerequisites for registering for the exam
Compulsory assignments (assessed approved/not approved)
The students must hand in two written assignments during the course and must pass them both on an approved/not approved basis before the final exam.
If a student - due to documented illness or failed attempts - does not pass both assignments, the student will be given a final chance to retake this part of the course by handing in a new assignment prior to the final exam.
Examination
Final exam:
Examination form Oral Exam
Individual or group exam Individual
Duration 20 min. per student, including examiners' discussion of grade, and informing plus explaining the grade
Preparation time No preparation
Grading scale 7-step scale
Examiner(s) Internal examiner and second internal examiner
Exam period December/January
Aids allowed to bring to the exam Closed Book
Make-up exam/re-exam
Same examination form as the ordinary exam
Description of the exam procedure
The duration of the exam is 18–20 minutes per student. Prepared power point presentation is a part of the exam. The exam has two parts:
Part 1 (10 minutes): A short presentation of one of the topics provided before the exam. This presentation should be based on (prepared in advanced and brought to the exam location on USB drive or the like) power point presentation. This presentation should last for 10 minutes including time for clarifying questions from the evaluators. The presentation will be evaluated based on its clarity, precision, and focus on the central points (including that the student is able to get to the central points within the allocated 10 minutes). Creativity (such as selfmade graphs and figures which illustrates an important point) will be rewarded. It is important to have understood (and be able to defend) all claims in the presentation. No other types of notes or exam aids are allowed. There is no limit to the number of prepared slides, but it will be an integrated part of the evaluation which material (and how much/how little) the student has decided to put on the slides. Also the timing of the presentation will be an integrated part of the evaluation. At the beginning of the examination, the student draws one of the topics at random and immediately thereafter gives the presentation.
Part 2 (8 minutes): The student is asked questions in parts of the curriculum different from the part covered in part 1. The questions will mainly focus on the curriculum covered as part of the other listed topics. For this part of the exam prepared slides are not allowed. The implementation exercisesgiven during the semester are included in the curriculum and there may be questions related to these exercises in this part of the exam. In general, short and concise answers will be rewarded. Both precision, the ability to get to the point. and the the ability to get around and have an overview of the curriculum will be strongly rewarded.
Course content and structure

The course provides the students with a profound knowledge of key concepts, relations, and models in general capital market theory. It is discussed how to represent uncertainty, the individuals and their preferences, assets and portfolios, and reasonable pricing systems in one- and multi-period settings, both in discrete-time and in continuous-time settings. The prices of financial assets are linked to the individuals’ optimal consumption choices, which lead to the Capital Asset Pricing Model and stochastic discount factor models etc. We also consider mutual fund performance and fund flows. The empirical validity and practical use of equilibrium models as well as various factor models of asset pricing will be addressed and discussed. The theoretical content of the course will have an overlap with and will be jointly co-taught with the CBS PhD course in Asset Pricing. The course is a fundamental theoretical finance course with a focus on empirical applications. The course complements especially the courses on Corporate Finance and Econometrics; it is essential for fully understanding the second semester course on Derivatives and Risk Management and for understanding empirical investigations of asset pricing models.
 
Teaching methods
The format of the course is based on three elements:
1. Class lectures devoted to the fundamental theoretical issues
2. Class exercises
3. Two written assignments, which the students have to pass before taking the final exam.
Further Information
PhD students taking the CBS PhD course in Asset Pricing are following a large part of this course and may be present during the lecture sessions.
Expected literature
Indicative: The Theory of Asset Pricing, George Pennacchi
Last updated on 02-08-2013