MSc Quantitative Finance / Course details
Year of entry: 2024
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Course unit details:
Asset Pricing Theory
|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|
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
• 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.
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.
Set of Exercises (20%)
Written Examination (80%)
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.
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)
|Scheduled activity hours|
|Assessment written exam||2|
|Independent study hours|
|Alex Taylor||Unit coordinator|
Informal Contact Methods