From 2 November 2020, the autumn semester 2020 will take place online. Exceptions: Courses that can only be carried out with on-site presence.
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363-1000-00L  Financial Economics

SemesterSpring Semester 2019
LecturersA. Bommier
Periodicityyearly recurring course
Language of instructionEnglish


AbstractThis is a theoretical course on the economics of financial decision making, at the crossroads between Microeconomics and Finance. It discusses portfolio choice theory, risk sharing, market equilibrium and asset pricing.
ObjectiveThe objective is to make students familiar with the economics of financial decision making and develop their intuition regarding the determination of asset prices, the notions of optimal risk sharing. However this is not a practical formation for traders. Moreover, the lecture doesn't cover topics such as market irrationality or systemic risk.
ContentThe following topics will be discussed:
Introduction to finance and investment planning; Option valuation; Arbitrage; Choice under uncertainty; Portfolio Choice; Risk sharing and insurance; Market equilibrium under symmetric information.
LiteratureSuggesting readings:

1) "Investments", by Z. Bodie, A. Kane and A. Marcus, for the
introductory part of the course (see chapters 20 and 21 in
particular).
2) "Finance and the Economics of Uncertainty" by G. Demange and G. Laroque, Blackwell, 2006.
3) "The Economics of Risk and Time", by C. Gollier, and

Other readings:
- "Intermediate Financial Theory" by J.-P. Danthine and J.B. Donaldson.
- Ingersoll, J., E., Theory of Financial Decision Making, Rowman and Littlefield Publishers.
- Leroy S and J. Werner, Principles of Financial Economics, Cambridge University Press, 2001
Prerequisites / NoticeBasic mathematical skills needed (calculus, linear algebra, convex analysis). Students must be able to solve simple optimization problems (e.g. Lagrangian methods). Some knowledge in microeconomics would help but is not compulsory. The bases will be covered in class.