| Students will be trained to critically evaluate financial market information and investor behavior, especially in the context of crises and market fluctuations.
Course Goals
This course provides students with a foundational understanding of core theoretical concepts related to financial markets, grounded in simple static models of financial economics. Students will learn the determinants of the real interest rate and the principles of measuring and pricing financial risk. Key topics include the history of financial markets, consumption and saving behavior, equilibrium real interest rates, present value asset pricing, individual decision-making under risk, optimal portfolios, and the implications of financial crises on investor behavior.
- Understand Core Concepts: Equip students with a solid theoretical foundation in financial markets and their functioning.
- Measure Financial Risk: Enable students to understand how to measure and price financial risk within the context of various financial models.
- Analyze Interest Rates: Familiarize students with the determinants of the real interest rate and its implications for financial decision-making.
- Evaluate Investment Strategies: Provide insights into individual decision-making under risk and the formulation of optimal investment portfolios.
- Contextualize Market Behavior: Promote understanding of the effects of financial crises on market dynamics and investor behavior.
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Students will be able to:
- Analyze financial market dynamics under certainty and uncertainty.
- Apply the expected utility concept to individual decision-making processes.
- Construct optimal portfolios based on risk preferences and financial goals.
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Students will grasp the basic terms and theories related to financial markets, including the history of financial markets, real interest rates, and asset pricing models.
Course Content
- Introduction: History of Financial Markets
- Complete Financial Markets Under Certainty
- Consumption and Saving
- Equilibrium Real Interest Rate
- Present Value Asset Pricing
- Uncertainty and Risk in Financial Markets
- Individual Decisions Under Risk and the Expected Utility Concept
- Optimal Portfolios Under Risk
- Consumption-Based Asset Pricing and the Capital Asset Pricing Model
- Financial Crisis and Investor Behavior
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