Readings

All Finance 4335 readings are required unless they are indicated as “Optional”. Short (10-minute) quizzes will be administered via Canvas, starting 24 hours prior to the beginning of class on each of the dates shown for the required readings.

We will follow the reading schedule given below:

Date

Reading

August 24

1. Calculating (Math) Derivatives, by James R. Garven
2. Optimization (chapter 2 from Managerial Economics, by W. Bruce Allen, Neil Doherty, Keith Weigelt, and Edwin Mansfield, 6th edition (2005))
3. How long does it take to double (triple/quadruple/n-tuple) your money?, by James R. Garven

August 29

1. The New Religion of Risk Management, by Peter Bernstein
2. Normal and standard normal distribution, by James R. Garven
3. Mean and Variance of a Two-Asset Portfolio, by James R. Garven

September 5

1. Supply of Insurance, by Greg Niehaus, University of South Carolina
2. Basic Economics: How Individuals Deal with Risk (Doherty, Chapter 2)
3. Introduction to Expected Utility and Risk Preferences, by James R. Garven

September 14

1. Expected Utility, Mean-Variance, and Stochastic Dominance, by James R. Garven
2. Modeling Risk Preferences Using Taylor Series Expansions of Utility Functions, by James R. Garven
3. Stochastic Dominance and Expected Utility (Optional), by James R. Garven
4. A Reexamination of the Relationship Between Preferences and Moment Orderings by Rational Risk-Averse Investors (Optional), by Patrick L. Brockett and James R. Garven

September 21

Finance 4335 Midterm 1 Synopsis, by James R. Garven

September 28

1. The Demand for Insurance, by James R. Garven
2. Demand for Insurance: Full vs. Partial Coverage, by James R. Garven

October 5

1. Moral Hazard & Adverse Selection (Doherty, Chapter 3)
2. Moral Hazard & Adverse Selection Synopsis, by James R. Garven
3. Moral Hazard and Insurance, by James R. Garven

October 12

1. Portfolio and Capital Market Theory, by James R. Garven
2. Portfolio Theory and Risk Management (Optional; Doherty, Chapter 4)
3. Capital Market Theory (Optional; Doherty, Chapter 5)

October 26

Finance 4335 Midterm 2 Synopsis, by James R. Garven

November 2

1. Derivatives and Options (Doherty, Chapter 6)
2. Teaching the Economics and Convergence of the Binomial and Black-Scholes Option Pricing Formulas, by James R. Garven and James I. Hilliard

November 30

1. Why is Risk Costly to Firms? (Doherty, Chapter 7)
2. How Insurance Solves the Underinvestment Problem, by James R. Garven
3. The Modigliani-Miller Theorems and Corporate Risk Management Theory, by James R. Garven
4. A Framework for Risk Management (Optional), by Ken Froot, David Scharfstein and Jeremy Stein

December 5

Finance 4335 Course Overview, by James R. Garven