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Finance 2: Dynamic Portfolio Choice (Fin2)
Provider: Faculty of Science

Activity no.: 5608-19-07-31 
Enrollment deadline: 18/04/2019
PlaceDepartment of Mathematical Sciences
Universitetsparken 5, 2100 København Ø
Date and time23.04.2019, at: 09:00 - 23.06.2019, at: 16:00
Regular seats50
ECTS credits7.50
Contact personNina Weisse    E-mail address: weisse@math.ku.dk
Enrolment Handling/Course OrganiserRolf Poulsen    E-mail address: rolf@math.ku.dk
Semester/BlockBlock 4
Scheme groupC
Exam formOral examination
Exam formOral examination
Exam detailsWithout preparation time, but "open book" (i.e. "all aids allowed").
Exam aidsAll aids allowed
Internal/external examiner
Course workload
Course workload categoryHours
Preparation163.00
Lectures28.00
Theory exercises14.00
Exam1.00
Sum206.00
Content
See the "Knowledge" part of the learning outcome below.

Formel requirements
Recommended Academic Qualifications: A bachelor degree in Mathematics-Economics.

Learning outcome
Competencies
- Formulate and analyze decision problems (investment/consumption and optimal stopping) in a stochastic multi-period setting.
- Analyze model consequences “with numbers”; algorithmically, experimentally or empirically. (As well as understand why these three things are different concepts.)
- Acquire the confidence to read presentations of the same – or almost the same – problem in the literature. Know that notation, motivation, and rigour varies and that there is rarely a gospel.

Skills
- Rigorously prove optimality principles and conditions for stochastic control problems in (discrete time, finite space)-multi-period setting.
- Explicitly solve simple investment/consumption and optimal stopping problems.
- Derive (with pen and paper), analyze (with a computer) and explain (in plain English) model implications; be they quantitative or qualitative, be they regarding policy, equilibrium, or empirics.

Knowledge
- Maximization of expected utility and (partial) equilibrium in one-period models, including betting against beta.
- Multi-period optimal portfolio choice. The martingale method vs. dynamic programming/the Bellman equation.
- Explicit solutions with HARA utility and binomial(‘ish) stock dynamics.
- Properties and consequences of solutions; myopia and constant weights, C-CAPM, the equity premium puzzle.
- Optimal stopping and the hedging and pricing of American options.

Teaching and learning methods
4 hours of lectures and 2 hours of tutorials per week for 7 weeks.

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