Asset Pricing Macro Analysis

3 Credits · Level: Graduate, Undergraduate

Analysts in both the private and public sectors are often asked to infer macroeconomic views that are embedded in the prices of actively traded financial assets (“what’s priced in?”). This course introduces students to some of the main conceptual, quantitative, and computation aspects of asset pricing, with a focus on assessing investor sentiment regarding the outlook for monetary policy, inflation, growth, default risk, and uncertainty. The main financial instruments covered in this course include interest rate futures, forward rate agreements, government (sovereign) bonds, interest rate swaps, inflation-indexed securities, credit-related instruments, and options. Asset pricing topics covered include an overview of key concepts from stochastic calculus, stochastic discount factor and hedging-based approaches, replication approaches, risk-neutral pricing, binomial trees, factor-models of the term structure of interest rates, risk aversion and risk premiums, and default-risk analysis.