At the end of the course, the student will be able to judge the efficiency of a given market model, to understand the representation of the preferences of a rational decision-maker and to calculate the capital market line and the market portfolio knowing returns and (co)variances of the traded assets.
Course contents summary
The course aims at giving the basic tools to evaluating and managing financial assets. After reviewing the main concepts of Probability, the following topics will be covered:
- the 'State Preference Model', a simple financial market model, used to introduce the concepts of a derivative asset and of arbitrage pricing;
- an introduction to Expected Utility Theory;
- Markowitz porftolio selection method;
- some highlights to model based on hidden variables (esp. CAPM)
E. Castagnoli, Brevissimo Abbecedario di Matematica Finanziaria, available online or at the Faculty Copy Center;
E. Castagnoli, M. Cigola, L. Peccati, Probability. A Brief Introduction, 2° edizione, Egea, 2009;
G. Favero, Contare oltre le dita. Elementi di calcolo combinatorio, available online or at the Faculty Copy Center.