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COURSE OUTLINE

Financial Theory

1. General

School

School of Finance and Statistics

Academic Unit

Department of Banking and Financial Management

Level of Studies

Undergraduate

Course code

ΧΡΘΕΡ01

Semester

6th

Course Title

Financial Theory

Idependent Teaching Activities

Weekly Teaching Hours

Credits

Lectures
4
7,5

Course Type

Compulsory. Background for all courses in Finance

Prerequite Courses

Language of Instruction and Examinations

Greek

Is the course offered to Erasmus Students?

No

Url (Eclass)

https://eclass.unipi.gr/modules/auth/courses.php?fc=64

2. Learning Outcomes

Learning Outcomes

Students will become familiar with the foundations of Financial Theory. This is a compulsory course that covers topics such as expected utility theory, portfolio choice under uncertainty, Markowitz theory, the foundations and use of the Capital Asset Pricing Model, and Arbitrage Pricing Theory. Emphasis is placed on the theoretical foundations.

General Competences
  • Search for, analysis and synthesis of data and information, with the use of the necessary technology
  • Adapting to new situations
  • Decision-making
  • Working independently
  • Team work
  • Working in an international environment
  • Working in an interdisciplinary environment
  • Production of new research ideas

3. Syllabus

Five Sections:

  1. Expected Utility (axioms of investor’s behavior under uncertainty, definition of risk aversion, risk premium, certainty equivalent, Pratt-Arrow risk premium, standard utility functions)
  2. Portfolio Choice (general setting, Arrow’s theorems)
  3. Markowitz Theory (portfolio statistics, portfolio frontier, minimum variance frontier, efficient frontier, two fund separation theorem, optimal portfolio)
  4. Capital Asset Pricing Model (assumptions, derivation, applications)
  5. Arbitrage Pricing Theory (assumption, derivation, zero beta portfolios)

 

4. Teaching and Learning Methods - Evaluation

Delivery

Face-to-face

Use of Information and Communications Technology

Teaching Methods

Activity

Semester Workload

Lectures
52
Independent Study
135,5
Σύνολο Μαθήματος
187,5

Student Performance Evaluation

Final Exam

Interaction over lectures

Problems solving

5. Attached Bibliography

Suggested Bibliography

Main:

  1. Danthine and J. Donaldson, 2005, Intermediate Financial Theory, 2nd Edition, Elsevier.
  2. Copeland, J. Weston, and Κ. Shastri, 2005, Financial Theory and Corporate Policy, Addison-Wesley Publishing Company.
  3. Pennacchi, 2008, Theory of Asset Pricing, Pearson Education.

Supplementary:

  1. Černý, 2004, Mathematical Techniques in Finance: Tools for Incomplete Markets, Princeton University Press
  2. E.J. Elton, M.J. Gruber, S.J. Brown, W.N. Goetzmann, 2003, Modern Portfolio Theory and Investment Analysis, John Wiley and Sons, 6th Edition.
  3. Fama, 1976, Foundations of Finance: Portfolio Decisions and Securities Prices, Basic Books, Inc, Publishers
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