Lecture Notes on Finance

Author(1): David Lando
Webpage: http://staff.cbs.dk/dlando/
Author(2): Rolf Poulsen
Webpage: http://www.math.ku.dk/~rolf/
Type: Study Notes
Level: Advanced MBA, MSc(Fin, Math. Fin)

The first chapter briefly describes the role of financial markets. The next chapter is about payment streams under certainty. You can read about zero coupon bonds, the term structure of interest rates, compounding, annuities, Internal Rate of Return (IRR), Net Present Value (NPV) and capital budgeting under certainty. The authors cover some bond important topics also such as duration, convexity and immunization. Arbitrage pricing in a single period model is covered in chapter 4 in which the authors describe the binomial model for option pricing. In the next chapter the discussion is about multi-period arbitrage pricing. The reader can find about conditional expectations, martingales and equivalent martingale measures. Chapter 6 is about option pricing and chapter 7 is about the Black and Scholes formula. The next chapter covers stochastic interest rates and chapter 9 is about portfolio theory. The authors develop the mathematics of mean variance portfolios (Markowitz portfolios) and the Capital Asset Pricing Model (CAPM). The topic of chapter 10 is factor models and the Arbitrage Pricing Theory (APT). In chapter 11 there is a switch to corporate finance. Firms' financial decisions are analyzed in a formal framework. You can read about the Modigliani-Miller results, the tax shield, bankruptchy costs and the financing project with positive NPV. The final chapter is about the Efficient Markets Hypothesis (EMH).

David Lando is professor at the Department of Finance, Copenhagen Business School and Rolf Poulsen is professor at the Department of Mathematical Sciences, University of Copenhagen

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Economics of Financial Risk Management

Author: Xiaodong Zhu
Webpage: http://homes.chass.utoronto.ca/~xzhu/

Type: Study Notes
Level: Advanced MBA, MSc(Fin, Math. Fin)

The first chapter discusses what is risk and what is risk management. There is a subsection with a brief history of Financial Innovation. Chapter 2 is about the Arrow-Debreu theory of financial markets. You can read about states of nature, contingent claims. An appendix at the end of the chapter, serves a short introduction to linear algebra. The author cover the pricing of options next as an application of Arrow-Debreu theory. Chapter 4 highlights the individual and social gains from the practice of risk management. In the following chapter, the author tries to answer why should firms manage risk. The next chapters deal with bonds and the pricing of forwards and swaps. Ito Calculus and the Black-Scholes formula follow. Chapter 9 is a brief discussion about Value at Risk. The topic of chapter 10 is credit risk and the author provides an introduction to credit default swaps pricing (CDS pricing). Next, the reader can find out how to use swaps to hedge interest rate risk. The final chapter teaches us how to use options to hedge uncertain price exposures.

Xiaodong Zhu is professor at the Department of Economics, University of Toronto

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New Facts in Finance

Author: John Cochrane
Type: Essay, Article
Level: Advanced Undergraduate, MBA, MSc, Ph.D.

You can download John Cochrane's "New Facts in Finance" essay using the following link

Lecture Notes in Finance 2

Author: Paul Söderlind
Type: Study Notes, Lecture Notes, e-book
Level: Advanced MBA, MSc(Fin), Phd(Fin)

These lecture notes are the second part of "Lecture Notes in Finance by Paul Söderlind. You can find the firs part here.

These lecture notes start with interest rate calculations. Chapter 13 is about bond portfolios , duration and yield curve models. The next chapter discusses about basic option pricing and the put-call parity. The binomial option pricing model is covered next. The Black-Scholes model of option pricing is the topic of chapter 16 and trading volatility is the topix of chapter 17. The last chapter is a little more advanced and discusses about dynamic portfolio choice.

Download Paul Söderlind's "Lecture Notes in Finance 2" (MSc Course) using the following link

Classic Lecture Notes of Dr. Robert C. Merton

Author: Robert Merton
Type: Study Notes, Lecture Notes
Level: MBA, MSc(Econ, Fin)

Robert C. Merton is Nobel laureate in Economics, son of Robert K. Merton, a distinguised sociologist. Robert C. Merton is well known both in academia and finance industry. He has published extensivly on option pricing, intertemporal asset pricing (ICAPM) and on intertemporal portfolio problem. Merton is also well known among the finance professionals for his involment along with Myron Scholes in the "Long Term Capital Manegement" (LTCM) hedge fund which failed in 1998.

You can find the classic lecture notes of Dr. Robert C. Merton in the following link: