Asset Pricing and Portfolio Choice Theory

Review Asset Pricing and Portfolio Choice Theory 

by KERRY E. BACK

Descriptions

This book is a comprehensive and concise introduction to asset pricing. It covers extensive exercises and a solutions manual fitting for those taking Ph.D. or Masters in Quantitative Finance level on asset pricing theory. This book is written especially for professors, professionals, and financial researchers.

The topics are divided into parts, covering various aspects of asset pricing theory. It also presents proofs and calculations through section appendices. Each chapter has a section dedicated to “Notes and References” where readers can find additional articles about the topic.

The second edition of the book is not far from the brilliance of the first edition. It presents a clear and smart logic behind the various discussions of each aspect of asset pricing theory. It includes additional information that was not included in the first edition, with a deeper discussion on each. 

This book is an easy-to-read text on asset pricing with clear and detailed information on the topic. It is suitable for a Ph.D. level reading and recommendable for those studying asset pricing at this level. This edition is more than a continued discussion of the first one, but also a complementary text to the excellence of the first edition on evaluating asset pricing theory.

About the Author

KERRY E. BACK is J. Howard Creekmore Professor of Finance at Rice University’s Jones Graduate School of Business. He is a Professor of Economics at the Rice University School of Social Sciences. He served as Associate Dean for Academic Affairs of the Olin School of Business at Washington University in St. Louis. He currently teaches introductory and advanced asset pricing theory to Ph.D. students in the Jones School.

Table of Contents

Preface to the First Edition

Preface to the Second Edition

Asset Pricing and Portfolio Puzzles

PART ONE Single-Period Models

1. Utility and Risk Aversion
2. Portfolio Choice
3. Stochastic Discount Factors
4. Equilibrium and Efficiency
5. Mean-Variance Analysis
6. Factor Models
7. Representative Investors

PART TWO Dynamic Models

1. Dynamic Securities Markets
2. Dynamic Portfolio Choice
3. Dynamic Asset Pricing
4. Explaining Puzzles
5. Brownian Motion and Stochastic Calculus
6. Continuous-Time Markets
7. Continuous-Time Portfolio Choice and Pricing
8. Continuous-Time Topics

PART THREE Derivative Securities

1. Option Pricing 401
2. Forwards, Futures, and More Option Pricing
3. Term Structure Models
4. Perpetual Options and the Leland Model
5. Real Options and q Theory

PART FOUR Beliefs, Information, and Preferences

1. Heterogeneous Beliefs
2. Rational Expectations Equilibria
3. Learning
4. Information, Strategic Trading, and Liquidity
5. Alternative Preferences

Appendices

1. Some Probability and Stochastic Process Theory

Bibliography

Index

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