Lectures: Mondays and Wednesdays, 5:30 PM - 6:45 PM, White Hall 200
Instructor: Ruoxuan Xiong, PAIS Building 581, ruoxuan.xiong@emory.edu
Office Hours: Tuesdays, 5:00 PM-6:00 PM, PAIS Building 581
We live in an uncertain world. Every day, we need to make decisions about alternatives whose consequences cannot be predicted with certainty. In each of these situations, we need to commit resources (time, money, effort, etc.) in the face of uncertainty about the future. Students will learn how to evaluate and compare investments under certainty about future payoffs, and will also learn how to extend these principles to investments under uncertainty and derive the implications for portfolio choice and risk management. The focus is on basic principles and how they are applied in practice. No prior knowledge of finance is required.
Topics covered include:
Important institutional material focusing on the financial environment: Major players in the financial market, the types of securities traded in the financial markets, and how and where securities are traded.
Modern portfolio theory and its implications for the equilibrium structure of expected rates of return on risky assets: Risk, return, volatility, value at risk, and expected utility; investors’ risk preferences and how they bear on asset allocation; portfolio optimization; capital asset pricing model; arbitrage pricing theory and linear factor model.
Security valuation: Fixed-income securities (bond pricing and term structure relationships), equity securities, and derivative securities.
Advanced topics: Financial machine learning and financial technology
By the end of this course, students will gain both theoretical knowledge and practical skills to apply quantitative methods to financial modeling and markets.
This schedule will be updated week by week as the semester progresses.
Week 1, W Aug 26: Introduction
Logistics, introduction of securities, modern portfolio theory, and valuation.
Week 2, M Aug 31: Investment Environments, W Sep 2: Debts
Introduction to Assets, investment process, security analysis, risk and return, financial institutions.
Money market, captial market, Treasury debts, municipal debts, municipal debts, corporate debts.
Week 3, W Sep 9: Equities
Common stock, prefered stock, stock market index calculation
Week 4, M Sep 14: Derivatives, W Sep 16: Return and Risk
Option and future
Rate of return, average and variance of return, risk premium, Sharpe ratio, learning from historical data
See here for the syllabus.
You are responsible for keeping up with all announcements made in class and for all changes in the schedule that are posted on the Canvas website.
The grade will be based on the following:
Homework: 30%
Midterm: 30%
Final exam: 35%
Participation: 5%
Bodie, Zvi, Kane, Alex, & Marcus, Alan. Investments. 2020 (12th edition).
Luenberger, David G. Investment Science. OUP Catalogue. 2013 (2nd edition).