# COMPG004 - Market Risk Measures and Portfolio Theory

**Note:** Whilst every effort is made to keep the syllabus and assessment records correct, the precise details must be checked with the lecturer(s).

Code | COMPG004 |
---|---|

Year | MSc |

Prerequisites | Knowledge of probability and stochastic process theory. Introductory course in Financial Mathematics. |

Term | 1 |

Taught By | Johannes Ruf (100%) |

Aims/Learning Outcomes | This course is an introduction to general asset pricing and portfolio theory. Topics include the modelling of preferences by utility functions and the introduction of the concept of risk-aversion, the modelling of the pricing kernel and the pricing of financial assets in equilibrium. The treatment of portfolio theory includes also the quantification of risk, efficient frontiers, and optimization problems. |

# Content

Utility functions and risk aversion models; equilibrium pricing and efficiency, arbitrage and pricing kernels; risk measurement, value at risk and coherent risk measures; portfolio choice and optimization, mean-variance analysis, beta pricing; consumption and terminal wealth optimization; dynamic financial markets and capital asset pricing in continuous time.

# Method of Instruction

3 hour lectures per week.

# Assessment

Two-hour written examination in term three (100%)

Student must achieve at least 50% to pass this course.

# Resources

**Recommended texts**

Back, K., *Asset Pricing and Portfolio Choice Theory*, Oxford University Press, 2010.

Cochrane, J. H., *Asset Pricing*, Princeton University Press, 2005.

Duffie, D., *Dynamic Asset Pricing Theory*, Princeton University Press, 2001.

Karatzas, I. & Shreve S. E., *Methods of Mathematical Finance*, Springer, 2010.