Simon Fraser University
Engaging the World

Course Outlines

Fall 2021 - ECON 815 G100

Financial Economics (4)

Class Number: 2892

Delivery Method: In Person

Overview

  • Course Times + Location:

    Sep 8 – Dec 7, 2021: Mon, 9:30–11:20 a.m.
    Burnaby

    Sep 8 – Dec 7, 2021: Thu, 10:30–11:20 a.m.
    Burnaby

  • Prerequisites:

    ECON 331.

Description

CALENDAR DESCRIPTION:

An introduction to the theory and practice of finance including topics from asset pricing, portfolio theory, and corporate finance. Offered once a year.

COURSE DETAILS:

This course is one of a two course sequence in financial economics. The goal is to survey a variety of topics in asset pricing theory. The related course by Bertille Antoine (Econ 818), will focus on empirical issues. Financial economics provides a great example of the interaction between theory and empirical evidence. The goal of these two courses is to illustrate this.

My goal is to discuss 9 key ideas in asset pricing theory; roughly one per week. Students will be asked to read the following 9 papers: (1) Arrow’s (RES, 1964) model of dynamic spanning, (2) Sharpe’s (JF, 1964) CAPM model, (3) Merton’s (JET, 1971) dynamic partial equilibrium model of optimal consumption/portfolio decisions, (4) Black & Scholes (JPE, 1973) option pricing model, (5) Lucas’s (Ecma, 1978) general equilibrium consumption-based CAPM model, (6) Harrison & Kreps’ (QJE, 1978) model of speculative trading with heterogeneous beliefs, (7) Harrison & Kreps’ (JET, 1979) theory of risk-neutral pricing and equivalent martingale measures, (8) Grossman & Stiglitz’ (AER, 1980) informational efficiency impossibility theorem , and (9) Tirole’s (Ecma, 1982) No Trade theorem. Although these papers may appear to be a bit “dated”, they continue to exert a profound influence on modern financial theory and practice. If time permits, we will discuss some of these recent extensions.

Much of modern financial theory uses the tools of continuous-time stochastic processes and continuous-time dynamic optimization. The first couple weeks of the course will provide a `crash course’ tutorial on these methods.

Grading

  • Problem sets 20%
  • Midterm exam 40%
  • Final exam 40%

Materials

REQUIRED READING:

There is no required textbook for this course. Papers and notes will be posted on the website as we go along. For those seeking a good textbook treatment of modern asset pricing, I recommend John Cochrane’s (2005) book, Asset Pricing, which is available at the bookstore and on reserve at the library.


Graduate Studies Notes:

Important dates and deadlines for graduate students are found here: http://www.sfu.ca/dean-gradstudies/current/important_dates/guidelines.html. The deadline to drop a course with a 100% refund is the end of week 2. The deadline to drop with no notation on your transcript is the end of week 3.

Registrar Notes:

ACADEMIC INTEGRITY: YOUR WORK, YOUR SUCCESS

SFU’s Academic Integrity web site http://www.sfu.ca/students/academicintegrity.html is filled with information on what is meant by academic dishonesty, where you can find resources to help with your studies and the consequences of cheating.  Check out the site for more information and videos that help explain the issues in plain English.

Each student is responsible for his or her conduct as it affects the University community.  Academic dishonesty, in whatever form, is ultimately destructive of the values of the University. Furthermore, it is unfair and discouraging to the majority of students who pursue their studies honestly. Scholarly integrity is required of all members of the University. http://www.sfu.ca/policies/gazette/student/s10-01.html

TEACHING AT SFU IN FALL 2021

Teaching at SFU in fall 2021 will involve primarily in-person instruction, with approximately 70 to 80 per cent of classes in person/on campus, with safety plans in place.  Whether your course will be in-person or through remote methods will be clearly identified in the schedule of classes.  You will also know at enrollment whether remote course components will be “live” (synchronous) or at your own pace (asynchronous).

Enrolling in a course acknowledges that you are able to attend in whatever format is required.  You should not enroll in a course that is in-person if you are not able to return to campus, and should be aware that remote study may entail different modes of learning, interaction with your instructor, and ways of getting feedback on your work than may be the case for in-person classes.

Students with hidden or visible disabilities who may need class or exam accommodations, including in the context of remote learning, are advised to register with the SFU Centre for Accessible Learning (caladmin@sfu.ca or 778-782-3112) as early as possible in order to prepare for the fall 2021 term.