Instructor: Paulo Brito
Schedule: Fridays (between February 18th and May 14th) 18h-21h
Room: 118 (F1)
Office hours: Fridays (between February 18th and May 20th) 11-12h (upon confirmation).
Rules: Regulation at ISEG
Assessment: written exam (in class).
This is an introductory course on general equilibrium asset pricing theory.
It aims to provide foundations on:
the microeconomics of intertemporal choice in deterministic and stochastic settings;
asset pricing determination in general equilibrium models, in deterministic and stochastic settings;
asset pricing determination in simultaneous to sequential economies;
introduction to advanced topics in macrofinance: role of inequality and financial frictions.
Introductory results on the tools needed (v.g., calculus, optimization, probability) will be provided along the way.
Basic utility theory
Deterministic GE (two-period) and asset pricing
Contingent goods and choice under uncertainty
Two period stochastic general equilibrium (SGE) in exchange Arrow-Debreu economies:
Environment, contracts, markets and models
Arrow-Debreu equilibrium for an exchange economy
Financial markets and the arbitrage pricing theory
Two period stochastic general equilibrium (SGE) and asset pricing in exchange finance economies:
Two period SGE models: extensions
Multi-period period DSGE:
Introduction to stochastic processes
Finance economies: the household problem
Finance economies: general equilibrium
|Topic||Slides||Problem sets||Other material|
|2||Basic utility theory||Problem set 1|
|3.1||Household problem in a deterministic environment||Problem set 2|
|3.2||Two-period deterministic DGE||Problem set 2 (questions (c))|
|4||Contingent goods and choice under uncertainty||Problem set 3||R script for problem 9|
|5 1||Two-period DSGE: introduction|
|5 2||Exchange Arrow-Debreu economies||Problem set 4: two-period AD|
|6||Financial markets and the arbitrage pricing theory||Problem set 5|
|7||DGSE for a finance economy||Problem set 6: two-period FE|
|8.2||Heterogeneous-agent economies||Problem set 7: heterogenous agent economies|
Disclaimer: the slides, the problem sets and some solutions will be provided before the class but can be modified afterwards. The final version will be posted before the 21st May. Please check the date of document. You can find last year’s version is here
Course notes: Brito (2014)
On the economics of uncertainty and information: [Bikhchandani et al.(2013)Bikhchandani, Hirshleifer, and Riley];
Some of the topics of the course, for those wondering what the research frontier looks like: [Ljungqvist and Sargent(2018)];
[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.
2017/18 EN , 2017/18 ER , 2020/21 EN , 2020/21 ER
Posted in May 13, 2022