MSc Quantitative Finance / Course details

Year of entry: 2025

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
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 (20%)

MCQ Examination (80%)

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 seminar academic papers for each topic (provided by the course coordinator)

Study hours

Scheduled activity hours
Assessment written exam 1.5
Lectures 22
Independent study hours
Independent study 126.5

Teaching staff

Staff member Role
Alex Taylor Unit coordinator

Additional notes

Informal Contact Methods

Office Hours

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