Teaching
Investments
Finanças I — Professional Master's in Economics
An SDF-first master's investments course: everything is built from one equation, price equals expected discounted payoff, p = E[mx], and every named model, whether the CAPM or the term structure, is a different answer to the question "what is the discount factor?" Roughly half unifying theory, half the applied canon, with Python labs on free data.
Topics
- Prices, payoffs, and the discount factor
- The consumption-based SDF, risk, and preferences
- The Markowitz mean-variance frontier and the CAPM as a special SDF
- Factor models for risk and for expected returns; regression tests of the cross-section
- Performance evaluation of managers and strategies
- Fixed income, derivatives, and state prices
- Efficiency and predictability
Audience
Professional master's students comfortable with statistics; methods ceiling is deliberately OLS, with clearly flagged PhD hints.
Materials
A ~514-page course book, nine session decks plus five recorded primer decks, Python labs, online quizzes, and two group coding projects.
The methods ceiling is deliberately OLS: time-series alphas, cross-sectional and Fama-MacBeth regressions, the GRS test, with GMM, MLE, and stochastic calculus appearing only as clearly flagged PhD hints. Five recorded primer decks (math, utility, fixed income, valuation, general equilibrium) bring students up to speed before the course begins.
Book Preface and Table of Contents Show
Investments — the course book, written for this course chapter by chapter.
From the preface. This book was written for the Investments course, the first finance course of the Mestrado Profissional em Economia at Insper. It was built for that course chapter by chapter, and it rests on a single principle, price equals expected discounted payoff, p = E[mx], where x is an asset's uncertain future payoff, p is what you pay for it today, and m is the stochastic discount factor (SDF): the value, in today's terms, of a dollar delivered in a particular future state. Read m as a statement about scarcity. It is high in the states an investor fears, where dollars are few and badly wanted, and low in the states she does not. An asset that pays well precisely when m is high is insurance, and it is dear; an asset that pays well only when m is low must offer a premium to be held at all.
The organizing claim of the course is that this equation is not a model of asset prices but the form that every model takes. Little is needed to get it: if the law of one price holds, such an m exists, and if there is no arbitrage, it can be chosen strictly positive. We need not believe in the discount factor; we need only find it. Everything after that is one question, asked nine times: what is m? The consumption-based model answers that m is a representative investor's marginal-utility growth. The CAPM answers that m is linear in the market return. Factor models make m linear in several factors. The term structure applies a single m recursively across maturities. Option pricing reads m as state prices. Predictability lets m move over time. Watching those fields collapse into one line of algebra is the pleasure of the course.
The preface continues with a session-by-session walkthrough, a reading map for the five primers, and the course's two contracts: the OLS methods ceiling and the optional PhD Hint boxes.
Contents
- Prices, Payoffs, and the Discount Factor
- The Consumption-Based SDF
- Markowitz: The Mean-Variance Frontier
- The CAPM as a Special SDF
- Factor Models for Risk
- Factor Models for Expected Returns
- Performance: Managers and Strategies
- Fixed Income and Derivatives
- Efficiency, Predictability, and the Capstone
Appendices: Primers, Technical Guides, and Resources
- A. Math Primer
- B. Utility and Risk Aversion
- C. Fixed-Income Refresher
- D. Equity Valuation Primer
- E. General Equilibrium and Arrow-Debreu Prices (optional)
- F. Python for Finance
- G. Using Claude, Claude Code, and VS Code in This Course
- H. Extra Materials: Recommended Videos and Online Courses