Foundations of Modern Finance  I

Foundations of Modern Finance I

120 h
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  • 12 Sequences
  • Advanced Level
  • Starts on September 19, 2023
  • Ends on December 17, 2023

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Course details


Introduction to Finance

  • Financial decisions of households and corporations
  • Approaches to valuing financial and real assets
  • The role and the overview of financial markets
  • Financial Frictions
  • Unifying principles of finance

Market Prices and Present Value

  • State-space model for time and risk
  • Security prices, state prices and arbitrage pricing
  • Present Value (PV) and future value
  • Discount rates, time value and risk premium: a historic perspective
  • Compound interest
  • Annuity and perpetuity formulas

Fixed Income Securities

  • Fixed-income markets
  • Term structure of interest rates
  • Properties of bond prices and market conventions
  • Inflation and real rates

Common Stocks

  • Discounted Cash Flow (DCF) model
  • Gordon model, multi-stage growth model
  • EPS, P/E, PVGO


  • Decision under uncertainty and expected utility theory
  • Risk aversion
  • Diversification and portfolio analytics
  • Systematic and idiosyncratic risks

Factor models and Arbitrage Pricing Theory (APT)

  • Factor models for risk
  • APT
  • Applications of APT

Market Efficiency

  • Efficient Market Hypothesis (EMH)
  • Implications of EMH
  • Empirical evidence on EMH

Introduction to Corporate Finance

  • Corporate financial decisions
  • Opportunity cost of capital and NPV
  • Financial objective of corporate managers

Capital Budgeting

  • NPV rules
  • Cash flow calculations
  • Alternatives to NPV
  • Project interactions
  • Capital budgeting and discount rates


  • Basic Probability and Statistics;
  • Calculus


Leonid Kogan
Nippon Telegraph & Telephone Professor of Management and a Professor of Finance
Massachusetts Institute of Technology

Jiang Wang
Mizuho Financial Group Professor and a Professor of Finance, Sloan School of Management
Massachusetts Institute of Technology

Egor Matveyev
Executive Director of MicroMasters Program in Finance
Massachusetts Institute of Technology


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