40.240 Investment Science (for ESD students only)

This course will focus on the financial theory of asset pricing. While this course will be broad in scope and will cover many different topics relating to finance, a particular emphasis will be placed on topics related to financial markets. The primary topics covered in the class include present value, asset valuation, expected utility, portfolio selection, and the trade-off between risk and return.

Learning Objectives

At the end of the term, students will be able to:

• Define, model and price various financial instruments, including stocks and bonds
• Construct optimal portfolios, based on mean-variance efficiency and utility theory, using probability and optimization
• Use the trading lab to research stocks and select a portfolio of stocks in one sector for semester-long “stock pitching” project.

Measurable Outcomes

• Price stocks, bonds and work with the term structure of interest rates.
• Use portfolio theory to select mean-variance optimal portfolios.
• Provide sector analysis and insight on individual stocks within a sector.
• Improve professional presentation skills with in class “stock pitches.”

Pre-Requisite Subject(s)

(For Intake AY2019)

• 10.004 Advanced Math II, 40.001 Probability (or 30.003/50.034 Introduction to Probability and Statistics)

(For Intake AY2020 and onwards)

• 40.017 Probability and Statistics
• 40.011 Data and Business Analytics

12 Credits