Home page of Business 35907. Prof. Pietro Veronesi

Topics in Dynamic Asset Pricing

 


Course Overview

This course has two main objectives: First, to introduce students to the frontier of research in asset pricing. We will cover recent models that have been proposed to shed light on intriguing empirical regularities, such as the equity premium and excess volatility puzzles, the interest rate puzzle, the time series and cross-sectional predictability of returns. The course also covers fixed income and credit risk, both from a no arbitrage and macroeconomic perspective. By the end of the course, students will be comfortable with the pros and cons of various modeling strategies, and their empirical predictions. Topics include complete and incomplete markets equilibrium models,learning and uncertainty, differences of opinion and asymmetric information, aversion to “ambiguity” and non additive preferences.

 

The second objective of the course is to teach students how to write coherent research papers: The main assignments will be four research ideas, that students (in small groups) have to develop into four research papers. Each of these papers will have to include an introduction with motivation, a model and its solution (tips will be provided), the discussion of the model’s predictions, and their empirical tests. In addition, students will have to turn in a final paper on a topic of their choice. By the end of the course, students will learn what it takes to write a paper, the type of assumptions sometimes we must make to solve models, when we need to resort on numerical methodologies to obtain results and model predictions, and, finally, how we confront the models’ predictions with empirical data.

The course is intended for Ph.D. students and requires familiarity with the basics of asset pricing theory, at the level of Bus35901 and Bus 35904, and derivative pricing, at the level of Bus 35100 (or, even better, Bus 35130 and Bus 35132).

Important Note: This course can be taken to satisfy the curriculum requirement in the finance concentration.

To know more about the course, you can download a PDF file with the Course Syllabus

Many have asked me to post my teaching notes a site that is not password protected (to access the link below you must be associated with booth). The following are selected chapters of my teaching notes. Be aware that these are teaching notes, and, as such, they are not clean. Sometimes, I only have tables and figures, with no comments in the text. Also, I cover much additional stuff on the board 

Presentation of the Course

Lecture Notes 1 Complete Markets Models

Addendum to Lecture Notes 1 Dynamic Portfolio Allocation Strategies

Addendum to Lecture Notes 1 Dynamic Portfolio Allocation Strategies: The Martingale Method

Lecture Notes 2 Equilibrium with Complete Markets

Addendum to Lecture Notes 2 Habits and Leverage

            Assignment 1

Lecture Notes 3 Uncertainty, Learning, and Asset Pricing

Addendum to Lecture Notes 3 What Ties Return Volatilities to Price Valuations and Fundamentals?

Addendum 2 to Lecture Notes 3 Incomplete Information and Learning: Portfolio Allocation (Martingale Method)

Addendum 3 to Lecture Notes 3 Stock Valuation with Uncertainty about Long-term Growth

            Assignment 2

Lecture Notes 4 Governments and Asset Prices

Lecture Notes 5 Participation Constraints, Asymmetric Information, and Differences of Opinion

Lecture Notes 6 Market Incompleteness and Portfolio Constraints

            Assignment 3

2016 Version of the course (1/2 course)

Presentation of the Course

Lecture Notes 1 Complete Markets Models

Addendum to Lecture Notes 1 Dynamic Portfolio Allocation Strategies

Addendum to Lecture Notes 1 Dynamic Portfolio Allocation Strategies: The Martingale Method

Lecture Notes 2 Equilibrium with Complete Markets

            Assignment 1

Lecture Notes 3 Uncertainty, Learning, and Asset Pricing

Addendum to Lecture Notes 3 What Ties Return Volatilities to Price Valuations and Fundamentals?

Addendum 2 to Lecture Notes 3 Incomplete Information and Learning: Portfolio Allocation (Martingale Method)

            Assignment 2

Lecture Notes 4 Governments and Asset Prices

2015 Version of the course

To know more about the course, you can download a PDF file with the Course Syllabus

Presentation of the Course

Lecture Notes 1 Complete Markets Models

Addendum to Lecture Notes 1 Dynamic Portfolio Allocation Strategies

Addendum to Lecture Notes 1 Dynamic Portfolio Allocation Strategies: The Martingale Method

Lecture Notes 2 Equilibrium with Complete Markets

            Assignment 1

Lecture Notes 3 Uncertainty, Learning, and Asset Pricing

Addendum to Lecture Notes 3 What Ties Return Volatilities to Price Valuations and Fundamentals?

Addendum 2 to Lecture Notes 3 Incomplete Information and Learning: Portfolio Allocation (Martingale Method)

            Assignment 2

Lecture Notes 4 Governments and Asset Prices

Lecture Notes 5 Heterogeneity

Lecture Notes 6 Market Incompleteness and Portfolio Constraints

Lecture Notes 7 Term Structure Models

2009 Version of the course

Lecture Notes 1 Dynamic Portfolio Allocation Strategies

Lecture Notes 2 Uncertainty, Learning and Asset Pricing

            Assignment 1

Lecture Notes 3 The Cross-Section of Stock Returns

            Assignment 2

Lecture Notes 4 Fixed Income Securities

Lecture Notes 5 No Arbitrage Term Structure Models and the Macro Economy

Lecture Notes 6 Structural Credit Risk Models

 

 

2005 Version of the course

Teaching Notes 0 Elements of Probability Theory

Teaching Notes 1 Review of Dynamic Equilibrium Models with Complete Markets

Addendum to TN1 Portfolio Selection with Time Varying Opportunity Set

Teaching Notes 2 Equilibrium with Complete Markets

Teaching Notes 3 Incomplete Information and Learning:  Equilibrium Returns

Addendum to TN3 Incomplete Information and Learning: Portfolio Allocation

Teaching Notes 4 Alternative Preferences: Habit Formation and Recursive Utility

Addendum to TN4: Portfolio Selection with Recursive Utility and Time Varying Expected Returns

Teaching Notes 5 Ambiguity Aversion and Robust Decision Making

Addendum to TN5: Robust Control, Time Varying Opportunity Set, and Learning

 


You can contact me by sending your mail at pietro.veronesi@ChicagoBooth.edu