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.
Introduction
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
Production economies
Heterogeneous agents
Limited participation
Moral hazard
Multi-period period DSGE:
Introduction to stochastic processes
AD economies
Finance economies: the household problem
Finance economies: general equilibrium
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)
Closer to this course: [Lengwiler(2004)], [LeRoy and Werner(2014)];
On the economics of uncertainty and information: [Bikhchandani et al.(2013)Bikhchandani, Hirshleifer, and Riley];
Contains most topics of this course, but at a more advanced level: [Altug and Labadie(2008)] [Campbell(2017)];
Some of the topics of the course, for those wondering what the research frontier looks like: [Ljungqvist and Sargent(2018)];
[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.
[Campbell(2017)] John Y Campbell. Financial Decisions and Markets: A Course in Asset Pricing. Princeton University Press, ebook edition, 2017. ISBN 1400888220,9781400888221.
[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.
2017/18 EN , 2017/18 ER , 2020/21 EN , 2020/21 ER
Posted in May 13, 2022