THEORY OF FINANCE

Description

The course presents an introduction to the theory of finance. The goal is to build a common basis for understanding financial investments for all first-year students in order to prepare them for the specialized courses that are taken in the subsequent semesters. The course combines theoretical frameworks with applied analyses, and offers the financial theory and analytical tools necessary for understanding how asset prices are determined. Topics covered include: compounding and discounting and its implications for arbitrage, fixed income and the term-structure of interest rates, portfolio theory and selection based on mean-variance analysis, models of risk and return such as the CAPM and multifactor models, performance evaluation of investment funds, asset pricing anomalies and behavioral finance. Arbitrage Fixed-income Expected utility Mean-variance approach Efficiency frontier CAPM Multifactor models Anomalies Exchange/course-load context: The official incoming exchange catalogue states that 30xxx codes refer to undergraduate courses, 20xxx and 21xxx codes refer to graduate courses, and 50xxx codes refer to the Integrated Master of Arts in Law. Undergraduate exchange students are allowed to select undergraduate-level courses only; graduate students can choose both undergraduate and graduate level courses. Bocconi credits are ECTS-equivalent. Each Bocconi credit corresponds to 25 hours of workload, including 8 lecture hours.