AMS 511, Foundation of Quantitative Finance
Introduction to capital markets, securities pricing, and modern portfolio theory, including the organization and operation of securities market, the Efficient Market Hypothesis and its implications, the Capital Asset Pricing Model, the Arbitrage Pricing Theory, and more general factor models. Common stocks and their valuation, statistical analysis, and portfolio selection in a single-period, mean-variance context will be explored along with its solution as a quadratic program. Fixed income securities and their valuation, statistical analysis, and portfolio selection. Discussion of the development and use of financial derivatives. Introduction to risk neutral pricing, stochastic calculus, and the Black-Scholes Formula. Whenever practical, examples will use real market data. Numerical exercises and projects in a high-level programming environment will also be assigned.
Prerequisite: AMS 505 or 510
3 credits, ABCF grading

Text: Risk and Asset Allocation 5th Edition, By Meucci, Springer
ISBN# 9783540222132