Overview

This Finance specialization is intended for students who want to acquire the analytical and empirical tools needed to understand the functioning of financial markets. Students will learn how investors choose their portfolios and how their choices determine equilibrium asset prices. Students will analyze the role of liquidity in securities markets, and they will understand how security trading is organized and regulated and how it has been reshaped by algorithmic and high frequency trading, and how the trading process affects the formation of asset prices. The program will equip students with the tools and the skills necessary to pursue a career in the financial industry.

Syllabus

Course 1: Market Microstructure
Course 2: Asset Pricing Fundamentals
Course 3: Asset Pricing Models

Courses

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15 hours 21 minutes
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Within this course you will learn about price formation and liquidity in securities markets. You will discover the determinants of market depth and security trading. In particular, the course focuses on price formation and liquidity in securities markets. The main issues covered are how to measure trading costs; how security prices, their liquidity and speed of price discovery are jointly determined, and how order flow affects prices; what are the determinants of market depth; how security trading is organized and regulated and how it has been reshaped by algorithmic and high frequency trading; how the organization of security trading affects trading costs and informational efficiency.
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14 hours 8 minutes
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The course Asset Pricing I will provide students with the main theoretical and analytical tools to study and understand the economics of financial markets and portfolio choices. After learning the different structure that financial markets can take and the key functions that these perform, learners will analyze how financial markets affect saving and investment decisions in an economy with no uncertainty. Then, learners will be introduced to expected utility theory, which will provide them with the key analytical tools to study choices under uncertainty. These tools will then be used to model and analyze portfolio choices: first, learners will study the so-called canonical portfolio problem, that is, the problem of an investor who has to choose how to allocate their wealth between a safe and a risky asset; then, they will study portfolio choices that involve multiple risky assets. The analysis of portfolio choices will allow learners to characterize and determine investors’ optimal demand for risky assets, which will lay the foundation for the analysis of the Capital Asset Pricing Model, a milestone for asset pricing and financial economics. The analysis of the CAPM will finally teach learners how to characterize equilibrium returns and asset prices in financial markets, also understanding the key forces that govern these key variables.
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9 hours 8 minutes
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The course covers several advanced topics in asset pricing, trading-off risks and return, and portfolio optimization. More precisely, students will first analyze two relevant extensions of the Capital Asset Pricing Model (CAPM) and learn how to determine the corresponding equilibrium in financial markets. Next, they will learn how to estimate empirically the risk-return relationship predicted by the Capital Asset Pricing Model. Students will also analyze two pricing models alternative to the CAPM. In the Arbitrage Pricing Theory, they will learn how to determine assets expected returns based on multiple risk factors and absence of arbitrage opportunities. In the Consumption Capital Asset Pricing Model, instead, they will learn how to solve the investors' joint consumption/investment decision problem and how to compute the equilibrium asset prices and expected returns in a dynamic pure exchange economy. Finally, the course concludes with a focus on the pricing of fixed income instruments.