Actuarial Aspects Of Asset Valuation

AY2016/2017 Semester 1

Expected utility theory and its applications to asset pricing and portfolio selection models. Measures of risk and risk aversion. Stochastic dominance. Mean-variance portfolio theory. Efficient frontier. Single and multifactor models of asset returns. Asset-liability modelling. Equilibrium models of pricing assets: procedure, assumptions and principal results. Capital Asset Pricing Model. Arbitrage Pricing Theory model. Efficient Market Hypothesis. Stochastic asset models. Parameter estimation for asset pricing models. Models for the term structure of interest rates: no-arbitrage versus general equilibrium models. Models for valuing derivative securities. Options pricing theory. Put-call parity. Black-Scholes pricing formula and its Garman-Kohlhagen form. Implied volatility. Numerical methods for valuing options.