Asset Pricing for Research Students

This information is for the 2022/23 session.

Teacher responsible

Prof Dimitri Vayanos, Prof Ian Martin, Dr Michela Verardo, Dr Cameron Peng, Prof Christopher Polk. 


This course is compulsory on the MRes/PhD in Finance. This course is available with permission as an outside option to students on other programmes where regulations permit.

Course content

The course is divided into two parts relating to theoretical and empirical asset pricing. The theoretical half of the course covers dynamic models of frictionless markets, both in discrete and in continuous time, and models with frictions, such as asymmetric information, costs of search and market participation, leverage constraints and delegated asset management. The empirical half of the course is dedicated to an empirical evaluation of asset-pricing models. Representative-agent models (with power, habit and recursive preferences) and their application to the valuation of equities are covered. Next, no-arbitrage term-structure and option-pricing models are discussed. The class concludes with equilibrium and reduced-from models of currencies.


30 hours of lectures in the MT. 30 hours of lectures in the LT.

Indicative reading

• John Campbell, 1999, Asset prices, consumption, and the business cycle, in J. B. Taylor and M. Woodford, Eds., Handbook of Macroeconomics, Volume 1C, Elsevier Science B.V

• John Campbell, 2017, Financial Decisions and Markets: A Course in Asset Pricing, Princeton University Press

• John Cochrane, 2004, Asset Pricing, Princeton University Press

• David Kreps, 2020, The Black-Scholes-Merton Model as an Idealization of Discrete-Time Economies, Econometric Society Monograph, Cambridge University Press.

• Andrei Shleifer, 2000, Inefficient Markets: An Introduction to Behavioral Finance, Clarendon Lectures in Economics, Oxford University Press.

• Kenneth Singleton, 2006, Empirical Dynamic Asset pricing, Princeton University Press


Continuous assessment (100%).

Key facts

Department: Finance

Total students 2021/22: 8

Average class size 2021/22: 7

Value: One Unit

Guidelines for interpreting course guide information

Course selection videos

Some departments have produced short videos to introduce their courses. Please refer to the course selection videos index page for further information.

Personal development skills

  • Application of numeracy skills
  • Specialist skills