MSc Quantitative Finance / Course details

Year of entry: 2023

Course unit details:
Asset Pricing Theory

Course unit fact file
Unit code BMAN70381
Credit rating 15
Unit level FHEQ level 7 – master's degree or fourth year of an integrated master's degree
Teaching period(s) Semester 1
Offered by Alliance Manchester Business School
Available as a free choice unit? No

Overview

Topic 1:                Mean-variance portfolio analysis and the CAPM

Topic 2:                Asset Pricing: A complete markets model

Topic 3:                Option Pricing and Risk-Neutral Valuation

Topic 4:                Multi-Period Asset Pricing

Topic 5:                Forward and Future Prices

Pre/co-requisites

BMAN70381 Programme Req: BMAN70381 is only available as a core unit to students on MSc Quantitative Finance and MSc Mathematical Finance

Aims

  • To gain a good understanding of the main theories and techniques of modern asset pricing.
  • To follow the derivation of the Capital Asset Pricing Model and the Black-Scholes option pricing model.
  • To appreciate the applications of these theories in portfolio analysis, risk management and corporate finance.
  • To develop analytical skills for use in Finance.

Learning outcomes

On completion of this unit successful students will have achieved the following learning outcomes:

  • Understand and be able to apply the main techniques of modern asset pricing.
  • Understand the main assumptions of the Capital Asset Pricing Model and be able to derive the main steps of the model.
  • Appreciate the most important applications of the model.
  • Understand how the model applies in a multi-period world.
  • Understand the principle of risk-neutral valuation and be able to derive the Black-Scholes option pricing model.
  • Appreciate the difference between forward contracts and futures contracts.
  • Understand the pricing of forward and futures contracts.

Assessment methods

Set of Exercises (10%)

Written Examination (90%) 2 hour

Feedback methods

Informal advice and discussion during a lecture, seminar, workshop or lab.

Responses to student emails and questions from a member of staff including feedback provided to a group via an online discussion forum.

Written and/or verbal comments on assessed or non-assessed coursework.

Recommended reading

Poon and Stapleton, Asset Pricing in Discrete Time: A Complete Markets Approach, Oxford UP, 2005

Copeland, Weston and Shastri, Financial Theory and Corporate Policy, 4th International edition, Prentice Hall, 2005

For a review of some basic mathematical techniques that are used in financial theory see Copeland and Weston, appendix B, D. For a review of the properties of the normal distribution see Stapleton and Poon: Appendix of Chapter 3.

Selection of seminal academic papers for each topic (provided by the course coordinator)

Study hours

Scheduled activity hours
Assessment written exam 2
Lectures 22
Independent study hours
Independent study 126

Teaching staff

Staff member Role
Alex Taylor Unit coordinator

Additional notes

Informal Contact Methods

Office Hours

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