Instructor: Paulo Brito

Schedule: Fridays (between February 21st and May 22nd) 18h-21h

Room: 118 (F1)

Office hours: Fridays (between February 21st and May 22nd) 11-12h (upon
confirmation).

Assessment: written exam

This is an introductory course on general equilibrium asset pricing theory.

It aims to provide foundations about:

- asset pricing determination in general equilibrium models;
- in deterministic and stochastic settings;
- in simultaneous and sequential economies;
- from simple two-period to multi-period models.

Introductory results on the tools needed (v.g., calculus, optimization, probability) will be provided along the way.

- Introduction
- Basic utility theory
- Two-period deterministic general equilibrium (DGE) and asset pricing:
- Contingent goods and choice under uncertainty
- Two period stochastic general equilibrium (SGE) in exchange Arrow-Debreu economies:
- Two period stochastic general equilibrium (SGE) and asset pricing in exchange finance economies:
- Two period SGE models: extensions
- Production economies
- Heterogeneous-agent economies
- Financial frictions: Limited participation ; Moral hazard

- Multi-period period DSGE:

, , , , ,

[Altug and Labadie(2008)] Sumru Altug and Pamela Labadie. Asset pricing for dynamic economies. Cambridge University Press, 2008.

[Bikhchandani et al.(2013)Bikhchandani, Hirshleifer, and Riley] Sushil Bikhchandani, Jack Hirshleifer, and John G. Riley. The analytics of uncertainty and Information. Cambrdge University Press, 2nd edition, 2013.

[Lengwiler(2004)] Yvan Lengwiler. Microfoundations of Financial Economics. Princeton Series in Finance. Princeton University Press, 2004.

[LeRoy and Werner(2014)] Stephen F. LeRoy and Jan Werner. Principles of Financial Economics. Cambridge University Press, Cambridge and New York, second edition, 2014.

[Ljungqvist and Sargent(2018)] Lars Ljungqvist and Thomas J. Sargent. Recursive Macroeconomic Theory. MIT Press, Cambridge and London, 4th edition, 2018.

- Very long run trends in interest rates: XIV-XXI centuries
- Macro-financial historical data
- The rate of return: 1870-2015

- Macro-financial history
- Financial crises and productivity
- The Case-Shiller_index
- Eurostat-interest rates
- OECD, long-term interest rates
- long-run trends in real interest rates

- Problem set 1: deterministic GE ,
- Problem set 2: choice under uncertainty ,
- Problem set 3: two-period AD ,
- Problem set 4: two-period finance economy ,
- Problem set 5: extensions ,

Posted in May 15, 2020