7. State Prices and Arbitrage
7.1. General Properties of Asset Pricing Models
We are interested in pricing assets. Assets are either nancial securities or actual means of
production (e.g., land, machines) that people buy in order to earn a prot. The form
9. Asymmetric Information
Up to this point, when examining equilibrium prices and allocations, we restricted ourselves to economies consisting of investors with homogeneous beliefs and homogeneous
information sets, only consumption or liquidity based tra
8. Multi-Period Consumption, Portfolio
Choice, and Asset Pricing
In this section we will derive a typical consumption-based asset pricing model in discrete time
with dynamic programming. These models have been developed both by macroeconomists
and nancial
6. Equilibrium and Efficiency
Up to now we always have assumed that the return processes are given and have focused on
the individual optimal behavior. Now we will turn away from this type of partial equilibrium
analysis to general equilibrium analysis an
3. Basics of Expected Utility Theory
Finance decisions involve time, uncertainty and monetary outcomes. We will now introduce
the uncertainty aspect and abstract from the time element. We want to nd a method to
choose between risky assets. When we think o
2. Notes on the Theory of Choice
2.1. Choice under Certainty
In this section we review the basic aspects of decision making under certainty. The objective
is to develop a logical coherent model for decision making based on a minimal set of axioms
(atoms o
5. CAPM and Linear Factor Models
5.1. The SharpeLintnerMossin Capital Asset Pricing Model (CAPM)
5.1.1. An Atheoretical Origin for a Linear Relation between Risk and Return
It is often thought, incorrectly, that a linear relationship between risk and retu
4. Mean-Variance Analysis and Portfolio
Separation
4.1. Motivation
Accepting the expected utility maximization framework, we now discuss the conditions for
mean-variance analysis to be valid. An individuals utility function may be expanded as a
Taylor ser
FINA 4160 A Intermediate Financial Theory
Introduction and Course Overview
Chow Ying-Foon, Ph.D.
Associate Professor
Department of Finance
The Chinese University of Hong Kong
201516 First Term
Y. F. Chow (CUHK)
Financial Economics
201516 First Term
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1. Introduction and Course Overview
1.1. Introduction
Finance has become an academic eld over the past sixty years. Before the 1950s, nance
was mostly a descriptive eld. In the 1950s, a few economists began asking (and answering)
some fundamental nance qu
CE BIO 1995
1. (a) (i) It contains enzyme / protease that - 1 digests the proteins in egg stains to small molecules - 1 which can dissolve in water / can be removed by water - 1 Communication skill (C) - 1 (ii) (iii) - to allow time for the action of enzy