The course provides a modern advanced treatment of principles of financial economics. Security prices under no-arbitrage. Introduction to utility theory. Pricing in competitive economies, first-principles derivations of the capital asset pricing model (CAPM). Valuation in a multi-period framework. Consumption-based asset pricing model and the fundamental asset pricing equation. The stochastic discount factor (SDF) and beta-representations. Relation between SDF, betas and the mean-variance frontier. Linear SDF models revisited: aribtrage pricing theory and the intertemporal CAPM.