Financial Decision Making

The aim of this course is to present the foundations of financial decision making and some of its applications, especially in financial markets but not limited to these. The concepts of price, financial risk and asset allocation are at the heart of this course. The first part is devoted to these questions whilst the second shows how these notions are used for investment decisions. This course gives in depth analyses and contains theoretical and technical developments that ask for some prerequisites: knowledge of probability theory and stochastic processes and basic results on derivative securities and fixed income.

This course gives an overview of the methods and techniques used in financial decision-making. It begins with the foundations of finance and general principles. Then it applies these concepts to investment decisions, assets valuation and financial risk management. The emphasis of this course is more on the methods than the formulas. It outlines the validity domain of the underlying theories, pointing out their importance and drawbacks. It justifies rigorously the use of tools and results necessary in other master courses in finance and economics. The students following this course learn about arbitrage opportunities, complete markets and equilibriums, and investigate the foundations of the CAPM, of option pricing and of yield curve modeling.