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IB9Y8 - Asset Pricing

  • Module code: IB9Y8
  • Module name: Asset Pricing
  • Department: Warwick Business School
  • Credit: 15

Content and teaching | Assessment | Availability

Module content and teaching

Principal aims

Overall Aim: To develop the theoretical understanding and practical skills necessary to enable students to master the “art” of passive and active asset management, and to assess the ex-post performance of the portfolio strategies constructed. Specific Aims: To describe the basic characteristics of fixed-income securities, equities, and other financial instruments (such as futures and options), as well as the structure and mechanics of the financial markets in which these securities are traded; To develop models for valuing risky assets, to assess the extent to which the observed market prices of risky assets are consistent with the predictions of these valuation models, and to explore ways of exploiting any mis-pricing; To develop models for assessing the risk-return characteristics of portfolios of risky assets, and derive methods for constructing portfolios from a given set of assets, making use of diversification to achieve the optimal risk-return trade-off; To discuss different asset management styles and objectives and the implied choice of an appropriate benchmark, and develop methods for assessing the ex-post performance of passively or actively managed portfolios relative to the benchmark; To study the ways in which derivative securities such as options and futures can be used in asset management to provide capital protection, or manage exposure to various risk factors (such as interest rates, exchange rates, etc).

Principal learning outcomes

"Subject knowledge/Key Skills: Read and interpret analysts’ reports and fund performance reports in the financial press; Use computer software to estimate risks and returns of financial assets from market data. Cognitive Skills: Explain the trade-off between risk and return, and critically analyse the limitations of using past data to predict future performance.Subject Specific/Professional Skills: Describe the characteristics of different asset classes and the markets in which these trade; Explain the concept of diversification, and be able to build portfolios with optimal risk-return characteristics from a given set of assets; Evaluate and interpret measures of portfolio performance using observed data."

Timetabled teaching activities

Total contact hours: 30 hrs. Lectures (over duration of course): 10 x 2 hour lectures. Seminars (over duration of course): 10 x 1 hour seminars. Module duration (weeks, if applicable): 10 week.

Departmental link

Module assessment

Assessment group Assessment name Percentage
15 CATS (Module code: IB9Y8-15)
D3 (Assessed/examined work) Class Test 1 10%
  Class Test 2 10%
  Group Project 20%
  2 hour examination (January) 60%
D4 (Assessed/examined work) Class Tests (London) 20%
  Group Project (London) 20%
  Examination (held in London) 60%

Module availability

This module is available on the following courses:

  • MSc in Finance (N300) - Year 2
  • Postgraduate Taught Finance with Behavioural Science (N301) - Year 2
  • MSc in Finance (Part-Time, Evening Study) (N302) - Year 2
  • Postgraduate Behavioural Finance (N304) - Year 1
  • Postgraduate Behavioural Finance (N304) - Year 2
  • Postgraduate Behavioural Finance (N304) - Year 3
  • Postgraduate Behavioural Finance (N304) - Year 4
Optional Core