On Moodle page You can find all the slides used for lectures.
Main textbook:
Eeckhoudt, L., Gollier, C., Schlesinger, H., 2005. Economic and Financial Decisions under Risk. PUP.
Learning Objectives
The goal of this course is to present the basic ideas of Risk Theory, and in particular the fundamental principles of choice under risk, insurance and portfolio decisions, and asset pricing.
Prerequisites
Basics of derivation, integration, and probability.
Teaching Methods
Classroom lectures.
Further information
There exists a Moodle page for this course which provides further teaching materials (no password).
Type of Assessment
Written and oral (optional) exam.
Course program
1. Risk aversion: definition of risk aversion, risk premium and certainty equivalent, degree of risk aversion, absolute risk aversion and prudence, relative risk aversion, utility functions.
2. Measures of risk: increases in risk, aversion to downside risk, stochastic dominance.
3. Insurance decisions: optimal insurance, optimal coinsurance, comparative statics in the coinsurance problem, the optimality of deductible insurance.
4. Portfolio choices: the one-risky--one-riskfree-asset model, the effect of background risk, portfolios of risky assets.
5. Asset pricing: Arrow-Debreau securities, efficient allocations of risks, equity premium, capital asset-pricing model, bond pricing.