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Lecture Notes in Financial Economics by Antonio Mele
Lecture Notes in Financial Economics by Antonio Mele
The present Lecture Notes in Financial Economics are based on my teaching notes for advanced undergraduate and graduate courses in financial economics, macroeconomic dynamics, financial econometrics and financial engineering. Part I, “Foundations,” develops the fundamentals tools of analysis used in Part II and Part III. These tools span such disparate topics as classical portfolio selection, dynamic consumption- and production- based asset pricing, in both discrete and continuous-time, the intricacies underlying incomplete markets and some other market imperfections and, finally, econometric tools comprising maximum likelihood, methods of moments, and the relatively more modern simulation-based inference methods. Part II, “Asset pricing and reality,” is about identifying the main empirical facts in finance and the challenges they pose to financial economists: from excess price volatility and countercyclical stock market volatility, to cross-sectional puzzles such as the value premium. This second part reviews the main models aiming to take these puzzles on board. Part III, “Applied asset pricing theory,” aims just to this: to use the main tools in Part I and cope with the main challenges occurring in actual capital markets, arising from option pricing and trading, interest rate modeling and credit risk and their associated derivatives. In a sense, Part II is about the big puzzles we face in fundamental research, while Part III is about how to live within our current and certainly unsatisfactory paradigms, so as to cope with demand for intellectual expertise.
These notes are still underground. The economic motivation and intuition are not always developed as deeply as they deserve, some derivations are inelegant, and sometimes, the English is a bit informal. Moreover, I still have to include material on asset pricing with asymmetric information, monetary models of asset prices, bubbles, asset prices implications of overlapping generations models, or financial frictions. Finally, I need to include more extensive surveys for each topic I cover, especially in Part II. I plan to revise these notes to fill these gaps. Meanwhile, any comments on this version are more than welcome.
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About Author
Antonio Mele
Antonio Mele is a Professor of Finance at USI (Università della Svizzera Italiana) and a Senior Chair at the SFI (Swiss Finance Institute) after a decade with the London School of Economics & Political Science. He is also a Research Fellow for the Financial Economics program at the Center for Economic Policy Research (CEPR) in London, and holds a PhD in Economics from the Universities of Paris and a BSc in Economics from LUISS University in Rome.
Antonio works on a variety of fields in financial economics: information in securities markets, financial markets and the macroeconomy, uncertainty and volatility in financial markets, interest rates and credit markets and, finally, econometrics and numerical methods in finance. His research has been published by top journals in Finance and in Economics such as the Journal of Financial Economics, the Review of Economic Studies, the Review of Financial Studies, and the Journal of Monetary Economics. He authored or co-authored three books on themes regarding capital market volatility, and a graduate level book with MIT Press (in press) on Financial Economics of about 1,300 pages.
His recent interests cover public debt sustainability; fiscal reforms and financial market behaviour; and economic history with special reference to Italian developments from WW II to nowadays.
Antonio’s work at the industry level has led to real-time indicators of uncertainty in fixed income markets that have been adopted by Chicago Board Options Exchange (Cboe) and S&P Dow Jones Indices and instruments to hedge volatility of interest rates and credit spreads. He is the co-inventor of the first volatility indices and related tradable instruments operated through an exchange, designed to standardize and simplify interest rate volatility trading much in the spirit of the Cboe VIX index in the equity space. Please visit a dedicated section of this site on Market Volatility for details, sources of data and available publications.
From 2015 to 2017, Antonio acted as a member of the Securities and Markets Stakeholder Group of the European Securities Markets Authority (ESMA), the supra-national supervisor of European financial markets, after having served as a member of its Group of Economic Advisers (2014-2015).
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