Asset Pricing


The course explores the nature and role of financial markets and institutions in the allocation of resources. The course pays particular attention to the emergence of derivative markets, analyzing the conceptual bases of the new instruments, including their pricing and trading strategies, as well as how financial entities use them in risk management.

Also we include recent topics of interest as the use of Machine Learning to study volatility measures and to identify asset pricing factors, the analysis of CoCo bond markets and the Crypto currencies markets.

Course Outline

Financial market structure; Derivatives and their pricing; Risk management. Hybrid Instuments and Cryptocurrencies

Slides: class0, class1, class2,class2b, class3, class3b, BSM, class4, class4b, VolJ,

           class5, class6, class6b, class7, class8, class9 

Reading and Videos List:

-- W. Ferson, E. Fama (Video) for May 2nd, 2019.

-- Monero (for May 6th, 2019)

-- 5FFF (for May 9th, 2019)

-- Moreira (for May 20th, 2019)

-- ML (for May 23th, 2019), Stein 56, SteinParadox

-- Veronessi-Pastor (for May 30th, 2019)

-- OBCDS (for June 6th, 2019)

-- BV (for June 13th, 2019)


Assignments: (Hull 9edt)

Assignment 1 :  10.14, 11.12, 11.25, 13.19 and 13.24.(due Class 3: 05/06/2019)
Assignment 2:   15.18, 15.25, 15.29, 19.24, 19.25 and 20.4 ,(due Class 6: 05/23/2019)                           
Assignment 3 :  23.17, 23.18, 24.24, 24.28 (due Class 9: 06/13/2019)


Readings and Class Participation (15%)

Three Homeworks (1rst(10%), 2nd (15%) and 3rd(20%))

Term paper (40%)



-Options, Futures and Other Derivatives, John Hull, Pretince Hall (2017), 10th edt.

-Financial Economics: A Concise Introduction to Classical and Behavioral Finance. T. Hens and M. Rieger. Springer-Verlag, 2010.


-Asset Pricing,  J. Cochrane.  Princeton University Press, 2005.

-The Handbook of Hybrid Securities: Convertible Bonds, CoCo Bonds and Bail-In. Jan De Spiegeleer, Wim Schoutens, Cynthia Van Hulle. Wiley-Finance. 2014

-Finance and the Good Society. Robert Shiller. Princeton Press. 2013.
-Virtual Currency Schemes. European Central Bank (ECB), 2012.  

-Bitcoin's Return Behavior:  What do we know so far?,  J. Fajardo. 2019 SSRN WP

-Bitcoin Option Pricing with Jumps.  J. Fajardo and A. Farias. WP