*Code 14610002 - Credits 5*

The course goal is to review the theoretical foundation of modern financial economics and basic concepts in finance. The course will review the basic financial instruments and the main models in portfolio theory, valuation of assets and financial derivatives.

**Contents:** Time value of money, arbitrage and short sale. Market rates: Libor, OIS, DTF, IBR. Cost of carry, Carry trade. Colombian capital market. Price, yield, and volatility of term structure of interest rates. Bond portfolio management. Sovereign and corporate Bonds. Stylized facts of the Colombian market. Introduction to stock valuation. Corporate financing. CAPM. Arbitrage pricing theory. Efficient market hypothesis empirical evidence. Fama-French model. Decisions under uncertainty and risk aversion. Capital allocation in risky assets. Optimal portfolios. Mean-variance analysis. Efficient portfolios. Efficient frontier and tangent portfolio. Active portfolio management: Black-Litterman. International investments. Derivatives: futures, forwards and swaps. Introduction to options. Valuation using binomial trees. Derivatives market in Colombia.