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.

Presentation of the Course