Asset pricing is developed around the concept of a stateprice deflator which relates the price of any asset to its future risky dividends and thus incorporates how to adjust for both time and risk in asset valuation. Mathematics of financial markets, mit press optional. Financial asset pricing theory offers a comprehensive overview of the classic and the. For debt, asset pricing is relatively simple, as cash flows to the owner are contractually fixed. Uncertainty, information, and stochastic processes 24 3.
Under general equilibrium theory prices are determined through market pricing by supply and demand. Here asset prices jointly satisfy the requirement that the quantities of each asset supplied and the quantities demanded must be equal at that price so called market clearing. Litzenberger, foundations for financial economics, north holland, 1988. Topics covered include i noarbitrage, arrowdebreu prices, and equivalent.
We report on two sets of largescale financial markets experiments that were designed to test the central proposition of modern asset pricing theory, namely, that risk premia are solely determined by covariance with aggregate risk. Financial economics i asset pricing course syllabus objectives of the course this course gives an introduction to the economics and mathematics of nancial markets. Monetary economics this article compares two leading models of asset pricing. Asset pricing wikibooks, open books for an open world. Portfolio choice for longterm investors with luis viceira, oxford university press 2002, and the squam lake report. Financial asset pricing theory, oxford university press, 20. Munk20, financial asset pricing theory, oxford university press. On the other hand, the creation of assets is done through investment. Asset pricing the authors model consumption and dividend growth rates as containing both a small longrun predictable component and fluctuating economic uncertainty consumption volatility. We find that the market reacts negatively to announcements that firms will file late. Asset pricing iv topics in asset pricing models professor. Recommended books in financial economics covering the capital asset pricing model, arbitrage pricing theory, chaos and fractals, computational finance, and volatility modeling. From the findings on this additional factor, so called momentum, carhart 1997 develops a deeper analysis of this effect on empirical predictions, so to propose its inclusion as a fourth factor on the fama and french 1993, 1996 3factor model, yielding the wellknown 4factor asset pricing model. The asset prices we discuss would include prices of bonds and stocks, interest rates, exchange rates, and derivatives of all these underlying.
Income expense sheet for couplesroommates in pdf format allows you to calculate two household members income and expenses for the purpose of budgeting. Some knowledge of the empirical issues in academic finance are required for it to make sense. Claus munk holds a phd in economics 1997 and an msc in. Jan 05, 2018 in finance, the capital asset pricing model capm is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already welldiversified portfolio, given that asset s nondiversifiable risk.
Asset pricing is developed around the concept of a stateprice deflator which relates. His research interests cover empirical asset pricing and the economics of the asset pricing industry. Intertemporal asset pricing evidence from germany, bernd meyer, 1999, business. Cash returned to investors debt payments, dividends, etc. Asset pricing model financial definition of asset pricing model.
The capitalassetpricing model and arbitrage pricing theory. Eugene fama, lars peter hansen, and robert shiller john y. An overview of asset pricing models university of bath. Asset pricing and portfolio choice theory, 2nd edition, oxford press. Financial asset pricing theory claus munk download. I argue that while the apt is compatible with the data available for testing theories of asset pricing, the capm is not.
Financial asset pricing theory cbs research portal. Finance theory and asset pricing, second edition oxford university press 2003. Financial asset pricing theory by claus munk, hardcover. Review of probability theory and stochastic processes. Expected excess returns risk premia vary over time.
The models are formulated and analyzed using concepts and. Munk20, financial asset pricing theory, oxford university press 4. Financial asset pricing theory claus munk oxford university press. Eugene fama is one of the worlds most cited economists in any eld. This set the stage for his 1973 general equilibrium model of security prices, another milestone. Asset pricing and portfolio choice theory second edition. Financial asset pricing theory request pdf researchgate. The fame of the laureates extends far beyond nancial economics. Financial asset pricing theory offers a comprehensive overview of the classic and the current research in theoretical asset pricing. My other research interests are in general asset pricing theory, the pricing of fixedincome securities, numerical methods in finance, and management compensation. Thus asset pricing is an extension of consumption theory. Jun 25, 2019 arbitrage pricing theory apt is a multifactor asset pricing model based on the idea that an assets returns can be predicted using the linear relationship between the assets expected return. These dynamics, for which they provide empirical support, in conjunction with generalized recursive preferences, can explain key asset markets phenomena.
Cash raised from investors selling financial assets 2. An overview of asset pricing models andreas krause university of bath school of management phone. Financial asset pricing theory by claus munk english financial asset pricing theory p. Other more advanced references that may be used in class or consulted on specific topics. Introduction to asset pricing theory the theory of asset pricing is concerned with explaining and determining prices of. This book provides a broad introduction of modern asset pricing theory with equal treatments for both discretetime and continuoustime modeling. I argue that while the apt is compatible with the data available for testing theories of asset. Financial economics i asset pricing course syllabus. Principles of financesection 1chapter 7capital asset.
Dynamic asset pricing theory provisional manuscript. The asset pricing results are based on the three increasingly restrictive assumptions. Du e2010, dynamic asset pricing theory, princeton university press course outline here is the course schedule and a tentative list of topics. Financial economics books asset pricing, computational. Financial economics i asset pricing 1 financial economics i asset pricing lecturer. Munk,claus,financialassetpricingtheory,mimeo,shortm. The aim of this course is to introduce students to the modern theory of asset pricing, portfolio theory and derivatives pricing. It starts with the canonical consumption capm model and how it fails to capture the main empirical. The key message of the model is that the expected excess return on a risky. Description theory of asset pricing unifies the central tenets and techniques of asset valuation into a single, comprehensive resource that is ideal for the first phd course in asset pricing.
Cash invested in real assets tangible and intangible 3. The last part of the chapter is devoted to the fundamental theorem of asset pricing, which relates the absence of arbitrage opportunities to the existence of a strictly positive linear pricing. His research has been published in academic journals such as journal of finance, journal of. Preface to the first edition xv preface to the second edition xvi asset pricing and portfolio puzzles xvii part one singleperiod models 1. Financial asset pricing theory, 20, 585 pages, claus. Financial asset pricing theory offers a comprehensive overview of the classic and the current. Being the rst course in nance within the icef master programme in financial economics, it introduces the students to the relevant modeling techniques for asset pricing. By claus munk financial asset pricing theory by claus munk financial asset pricing theory offers a comprehensive overview of the classic and the current research in theoretical asset pricing. Mascolell, whinston and green, microeconomic theory, oup, 1995. Lecture notes in macroeconomics asset pricing asset pricing sits on the border of two areas of macro. Claus munk presenting models for the pricing of financial assets such as stocks, bonds and options, this book outlines models which are formulated and analyzed using concepts and techniques from mathematics and.
Request pdf on may 1, 20, claus munk and others published financial. The book presents models for the pricing of financial assets such as stocks, bonds, and options. Fixing the financial system with the squam lake group of financial. Arbitrage pricing theory apt is a multifactor asset pricing model based on the idea that an assets returns can be predicted using the linear relationship between the assets expected return. Language of submission in accord with mcgill universitys charter of students rights, students in this course have the right to submit in english or in french any written work. Asset pricing models are models for the pricing of financial assets. More details and a lot of specific models are discussed in munk 2005a. By striking a balance between fundamental theories and cuttingedge research, pennacchi offers the reader a wellrounded introduction to modern asset pricing theory that does not require a high. Theme a new class of capital asset pricing models arises from the rst principle of real investment for individual rms. Ideal main textbook for courses where the required readings often consists of a long list of research articles with varying focus, notation, and writing style. In financial economics, asset pricing refers to a formal treatment and. Campbell1 may 2014 1department of economics, littauer center, harvard university, cambridge ma 028, and nber.
Undoubtedly, the capital asset pricing model capm developed by sharpe 1964, lintner 1965, and mossin 1966 is the best known asset pricing model. These notes simply cover the way i plan to discuss the material in class. Financial asset pricing theory claus munk oxpord university press. Claus munk financial asset pricing theory world of digitals. Theoretical asset pricing the graduate school of finance. The central goal of asset pricing is to determine the prices or values of claims to uncertain payments. Modern asset pricing theory is based on models of the possible states and the associated state prices. The password for opening the files will be emailed to all students.
Financial asset pricing theory, 20, 585 pages, claus munk. Portfolios, arbitrage, and market completeness 70 4. In finance, arbitrage pricing theory apt is a general theory of asset pricing that holds that the expected return of a financial asset can be modeled as a linear function of various factors or theoretical market indices, where sensitivity to changes in each factor is represented by a factorspecific beta coefficient. Financial economics i asset pricing 3 neftci,salihn.
The reading from asset pricing lays out asset pricing theory in a careful way. The framework of financial analysis corporate financial decisions 1. Various aspects of these models still need to be explored and i am involved in several research projects doing so. The foundation for this theory was substantially later expanded upon by markowitz fellow nobel prize cowinner, william sharpe, who is widely known for his 1964 capital asset pricing model work on the theory of financial asset price formation. This is challenging because the timing and the risk of uncertain payments have to be taken into account simultaneously. An introduction to financial asset pricing robert a. Asset pricing theory phd course the einaudi institute for. Fernando chague 2nd quarter of 2018 in this course we present the latest asset pricing models based on the problem of representative agents. By striking a balance between fundamental theories and cuttingedge research, pennacchi offers the reader a wellrounded introduction to modern asset pricing theory. Fa financial asset pricing theory af claus munk som bog pa engelsk. Theory of financial risk and derivative pricing from statistical physics to risk management. Comprehensive and unified presentation of modern asset pricing theory. The models are formulated and analyzed using concepts and techniques from.
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