by Hervé Crès, Mich Tvede, Tobias Markeprand
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Suggested foundations for asset pricing and factor research and stochastic processes and pricing. Specialist prerequisites vary by paper.
Interpret exposures, residuals and uncertainty in fitted coefficients.
Work with returns and recognise their empirical limitations.
Understand what it means to condition on current information.
Follow Brownian dynamics and the second-order term in Itô calculus.
Connect factor definitions to portfolio construction.
Distinguish exposure estimation from tests of expected returns.
Connect stochastic dynamics to no-arbitrage prices.
Connect diversification, common risk factors, investor views, and the properties of a risk measure.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.