Syllabus: FNAN 301 (Financial Management), Fall 2010
Updated November 29, 2010 Course coordinator: Professor: Office: Email: Phone: Office hours: Professor: Office: Email: Phone: Office hours: Dr. Steve Pilloff Dr. Steve Pilloff 224 Enterprise Hall spillo
THE BINOMIAL MODEL
A simple one period world (again) A stock, s, and a
risk free bond, B, paying a continuous rate, r
Start at time t=0 and end a short tick later, t.
How can we replicate any derivative, f, on s ?
Form a portfol
Consumption and Investment
Study of Rational decision making by individuals (and their agents) among risky alternatives
What is risk?
Volatility in returns
Why study Financial Theory?
Models for Evaluating
The Gaussian Copula Model:
Workhorse for evaluating
CDOs and Structured Credit
Securities. Plus a Primer on
WHAT IS A CDO (COLLATERALIZED DEBT
A stand-alone, special-purpose vehicle (SPV
Capital Asset Pricing Model (CAPM)
Arbitrage Pricing Theory (APT)
QUICK RECAP OF WEEK 2
For a Risk Averse individual, U(E(W) > E(U(W)
i.e. utility from the actuarial value of the gamble
obtained with certainty is higher than the utility
of taking on
Arrow-Debreu Securities &
Also called State Contingent Claims, or State Claims, or State Prices
Primitive securities: Have a payout in only ONE future state of the world and zero or no
Expected Utility Asset Allocation and
Optimal Portfolio Choice
QUICK RECAP OF WEEK 1
Individuals have unique preferences for consumption and can derive different
levels of utility from consuming the same goods or consumption bundles.
The Combined Housing and Transportation
Burdens of Working Families
Robert Reid, former executive director,
and Maria Sayers, former director of development,
with thanks for the