Objectifs (en terme de compétences)

The course is an introduction to modern financial theory. Emphasis is placed on the equilibrium determination of prices of securities and derivative instruments under conditions of perfect, public information. The first half of the course is devoted to dynamic analysis in continous time. The theoritical analysis is applied to models widely used in empirical work and financial decision making.

Objet de l'activité (principaux thèmes à aborder)

Outline of subjects treated1. Principles of arbitrage in general and in illustrations with a variety of financial instruments.2. Choice under uncertainty, expected utility stochastic dominance.3. General equilibrium with complete markets, efficient markets with uncertainty, spanning.4. Capital asset pricing model, consumption CAPM.5. Arbitrage pricing theory6. Introduction to derivative instruments7. Multiperiod finance : stochastic processes, stationarity, Ito's lemma.8. Valuation of stock options, Black Scholes formula, binomial pricing model, numerical solution methods.9. Hedging and dynamic portofolio theory10. Contnuous time analysis of interest rate and foreign exchange derivative instruments.

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