Insegnamento a.a. 2025-2026

20135 - THEORY OF FINANCE

Department of Finance


Student consultation hours
Class timetable
Exam timetable

Course taught in English
Go to class group/s: 44 - 45 - 46
FIN (6 credits - II sem. - OB  |  SECS-P/01)
Course Director:
FLORIAN NAGLER

Classes: 44 (II sem.) - 45 (II sem.) - 46 (II sem.)
Instructors:
Class 44: FLORIAN NAGLER, Class 45: FLORIAN NAGLER, Class 46: FLORIAN NAGLER


Suggested background knowledge

The course presents an introduction to the theory of finance. The goal is to build a common basis for understanding financial investments for all first-year students in order to prepare them for the specialized courses that are taken in the subsequent semesters. The course combines theoretical frameworks with applied analyses, and offers the financial theory and analytical tools necessary for understanding how asset prices are determined. Topics covered include: compounding and discounting and its implications for arbitrage, fixed income and the term-structure of interest rates, portfolio theory and selection based on mean-variance analysis, models of risk and return such as the CAPM and multifactor models, performance evaluation of investment funds, asset pricing anomalies and behavioral finance.

Mission & Content Summary

MISSION

The course presents an introduction to the theory of finance. The goal is to build a common basis for understanding financial investments for all first-year students in order to prepare them for the specialized courses that are taken in the subsequent semesters. The course combines theoretical frameworks with applied analyses, and offers the financial theory and analytical tools necessary for understanding how asset prices are determined. Topics covered include: compounding and discounting and its implications for arbitrage, fixed income and the term-structure of interest rates, portfolio theory and selection based on mean-variance analysis, models of risk and return such as the CAPM and multifactor models, performance evaluation of investment funds, asset pricing anomalies and behavioral finance.

CONTENT SUMMARY

  • Arbitrage
  • Fixed-income
  • Expected utility
  • Mean-variance approach
  • Efficiency frontier
  • CAPM
  • Multifactor models
  • Anomalies

Intended Learning Outcomes (ILO)

KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...
  • How to compound and discount cashflows in a consistent way
  • Make explicit the implications of the absence of arbitrage for the valuation of financial securities
  • Identify the relevant variables for optimal allocation and pricing of assets
  • Understanding why investors preferences give rise to a risk-return trade-off
  • Understanding how asset prices are formed in equilibrium
  • Use factor models to quantify the corresponding exposures and related risk premiums
  • Able to implement real world problems in spreadsheets

APPLYING KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...

The course guides students to a deeper understanding of the theory of investments, and how it can be implemented in reality. In particular, it formalizes:

  • The notion of optimal choice for a rational and risk-averse investor
  • The methods for identification and classification of risk and return
  • The notion of fair price in relation to the meeting of the supply and demand of market securities
  • Financial management best practices in relation to the underlying risks
  • Students will be able to estimate and test valuation models, build portfolio strategies, and test their performance on data
  • Students will be able to communicate results obtained in rigorous analyses to decision makers in a consistent way

Teaching methods

  • Lectures
  • Guest speaker's talks (in class or in distance)
  • Practical Exercises
  • Collaborative Works / Assignments

DETAILS

  • Guest speakers from leading financial institutions present to students real life professional applications of investments and current real-world issues
  • Students can solve (mini-) case studies using spreadsheet programs in groups
  • Students can work on a mid-term takehome assignment

Assessment methods

  Continuous assessment Partial exams General exam
  • Written individual exam (traditional/online)
     x
  • Individual Works/ Assignment (report, exercise, presentation, project work etc.)
 x    
  • Collaborative Works / Assignment (report, exercise, presentation, project work etc.)
 x    

ATTENDING AND NOT ATTENDING STUDENTS

  • Optional group work (20% if better than final exam)
    • Students are asked to solve in a group a case study
  • Optional mid-term assignment (20% if better than final exam)
    • Students are asked to solve a problem set
  • Mandatory final written exam (60% to 100%)
    • Covers all the content discussed throughout the class

Teaching materials


ATTENDING AND NOT ATTENDING STUDENTS

  • The main text used for the course is Bodie, Kane, and Marcus, Investments, 13th Edition.
  • Supplemental readings, cases, articles, spreadsheerts will be posted on Blackbaord.
Last change 12/05/2025 16:23