The seminal portfolio theory of Markowitz – taught in introductory finance classes – is subject to several problems and is therefore not applicable to more complex investment decision problems. The research strand dealing with asset allocation and portfolio planning has experienced rapid growth during the past decade. Topics include for example the question of how to solve for the optimal portfolio facing a long investment horizon, how to cope with stochastic changes in investment opportunities, and how to take income risk into account.
The second part of the class deals with asset pricing. General equilibrium models relate (stock) prices and interest rates to fundamentals and show the relation between future dividend payments, preferences of investors, and prices. The class also discusses puzzles in asset pricing and potential solutions of these puzzles.
The third part of the class covers option pricing models. It deals with models which go beyond Black-Scholes. Since these models often do not allow for closed-form solutions, we will also discusses numerical methods.
Please note that the course is designed for PhD candidates, however interested students can apply for it.
- Lehrende/r: Nicole Branger
- Lehrende/r: René Marian Flacke
- Lehrende/r: Friedrich Lorenz