MODERN FINANCE THEORY

Modern Finance Theory bridges the gap between financial theory and empirical projects that require numerical estimations and computations.The approach is formal and concise, but uses relatively easy mathematics, and leads directly to implementable techniques for the students. This method has proved successful for finance courses with both theory elements and empirical problem sets, taught over many years by the author.The book uses more than 200 plots that help develop intuition for the results and equations that can be directly implemented in empirical projects. Appendices are also included to introduce matrix algebra, statistics, calculus and optimization. All key results are proved, but the proofs are not required for following the text.Topics covered in this book include investment analysis, CAPM and multifactor models, risk measures, return predictability, performance analysis, foreign exchange, and the pricing and hedging of bonds and options.This textbook is suitable for MA/MSc students studying finance courses.