Financial Economics I

Introduction to the study of financial markets and asset pricing from the perspective of economic theory. Topics include equilibrium economies with a representative agent; equilibrium economies with incomplete markets, borrowing constraints and transaction costs, limited stock market participation, private information, limited commitment; optimal security design; behavioral finance. While the stress is on modeling and tools, the course also introduces the empirical methodologies and the calibration techniques used in financial economics, as well as some of the most controversial evidence on asset prices.