MA418      Half Unit
Preferences, Optimal Portfolio Choice, and Equilibrium

This information is for the 2017/18 session.

Teacher responsible

Dr Albina Danilova


This course is available on the MSc in Applicable Mathematics and MSc in Financial Mathematics. This course is available with permission as an outside option to students on other programmes where regulations permit.


Students must have completed either Stochastic Processes (ST409) or Probability and Measure (MA411) or The Mathematics of the Black and Scholes Theory (MA415).

Course content

This course is concerned with the theory of optimal investment and consumption. The course starts with the derivation of utility functions from the axioms of an agent's preferences. Utility functions are then used as a measure of portfolio performance in a financial market. Optimal investment and consumption strategies are obtained for various utility functions in both complete and some types of incomplete markets. Equilibrium and asset price formation are considered in the context of complete and informationally incomplete markets


20 hours of lectures and 10 hours of seminars in the LT.

Indicative reading

R.A.Dana and M.Jeanblanc, Financial Markets in Continuous Time; Springer; I D.Duffie, Dynamic Asset Pricing, Princeton University Press; I.Karatzas and S.E.Shreve, Methods of Mathematical Finance, Springer.


Exam (100%, duration: 3 hours) in the main exam period.

Key facts

Department: Mathematics

Total students 2016/17: Unavailable

Average class size 2016/17: Unavailable

Controlled access 2016/17: No

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Self-management
  • Problem solving
  • Application of information skills
  • Communication
  • Application of numeracy skills
  • Specialist skills