> For the complete documentation index, see [llms.txt](https://laurence-wilse-samson.gitbook.io/textbooks/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://laurence-wilse-samson.gitbook.io/textbooks/financial-economics-claims-prices-holders/for_instructors.md).

# For Instructors

*Financial Economics: Claims, Prices, and Holders*

***

This section collects the apparatus that belongs to whoever is assigning this book rather than to whoever is reading it: the complete list of starred sections, two thirteen-week syllabus maps, and the map of what each chapter actually requires. Chapter 1 §1.5 states the conventions in prose and sets out the three paths through the book; what follows is the machinery for building a course out of them. Nothing here is needed in order to read the book, which is why it sits in front of Chapter 1 rather than inside it.

***

## The complete list of starred sections

A star in a section heading marks a PhD-track section. The body of every chapter is written for the primary reader — an advanced undergraduate or masters student — and is self-contained without the starred material: a reader who skips every starred section loses generality, not the argument. The one dependency an instructor assigning a partial PhD track has to respect runs inside the track, since starred sections may assume the starred sections of earlier chapters. The same mark appears on the harder problems and on the optional extensions to data exercises, where it means "if you have licensed data."

| Chapter | Starred sections                                                         |
| ------- | ------------------------------------------------------------------------ |
| 3       | §3.5 The Stochastic Discount Factor                                      |
| 4       | §4.6 The CAPM as an SDF Restriction                                      |
| 5       | §5.4 Hansen-Jagannathan Bounds; §5.6 Epstein-Zin Preferences             |
| 6       | §6.1 How near is "near"?; §6.5 IPCA and shrinkage                        |
| 7       | §7.2 Solving the linear equilibrium; §7.4 Why long-horizon $$R^2$$ rises |
| 8       | §8.4 gates the Black-Scholes derivation itself out to Appendix D         |
| 9       | §9.2 Affine term structure models                                        |
| 10      | §10.3 The Duffie-Singleton reduction                                     |
| 11      | §11.3 Where the equilibrium comes from                                   |
| 16      | §16.6 The Arithmetic of Divestment                                       |
| 19      | §19.5 Where the constraint enters                                        |
| 20      | §20.2 Identification: why you cannot regress holdings on prices          |
| 24      | Box 24.2 Rothschild-Stiglitz: screening and the separating equilibrium   |
| 25      | §25.5 What the firm fixed effect absorbs, and what it does not           |

Chapters 2, 12-15, 17-18, 21-23 and 26-27 have no starred sections; their harder material is in the problems.

***

## Two syllabus maps

Both maps assume a thirteen-week semester with one substantial meeting a week, and both leave the final week for a chapter that ties the preceding ones together rather than adding a new market.

**Course A — Financial Economics / Investments (economics department core).** The standard sequence: valuation, then asset pricing theory, then markets, then the holders.

| Week | Chapters | Theme                                                   |
| ---- | -------- | ------------------------------------------------------- |
| 1    | 1-2      | The organizing question; the map of claims and holders  |
| 2    | 3        | Present value, arbitrage, and the pricing equation      |
| 3    | 4        | Portfolio choice and the CAPM                           |
| 4    | 5        | Consumption, risk premia, and the equity premium puzzle |
| 5    | 6        | Factor models and the cross-section                     |
| 6    | 7        | Information, efficiency, and price discovery            |
| 7    | 8        | Derivatives and option pricing                          |
| 8    | 9        | Fixed income, the term structure, and safe assets       |
| 9    | 10       | Credit risk                                             |
| 10   | 11-12    | Microstructure, liquidity, and equity issuance          |
| 11   | 14-15    | Households as investors; behavioral finance             |
| 12   | 16-17    | Institutional investors; the passive revolution         |
| 13   | 20       | The demand for assets — the synthesis                   |

Chapter 13 (mortgage securities) and Chapters 18-19 are the natural additions if a fourteenth week exists. Where the semester really is thirteen weeks, assign §19.5 alongside the last week: Chapter 20 §20.4 assembles the intermediary sector as one of its demand curves, and the capstone reads thinly without it. Part V is the companion corporate-finance course.

**Course B — Asset Management and the Investor Ecology (elective).** Front-loaded on the pricing machinery the ecology consumes, then Part IV in full.

| Week | Chapters         | Theme                                                         |
| ---- | ---------------- | ------------------------------------------------------------- |
| 1    | 1-2              | The question; who holds what                                  |
| 2    | 3-4              | The pricing equation and mean-variance, compactly             |
| 3    | 5 (light), 6     | Risk premia and the factors an allocator is sold              |
| 4    | 7                | Efficiency, predictability, and the limits of both            |
| 5    | 11               | Liquidity as a constraint and as a priced characteristic      |
| 6    | 12               | Issuance, index inclusion, and the demand-shock experiment    |
| 7    | 14-15            | Households as the ultimate holders, and how they behave       |
| 8    | 16               | Institutional investors: liabilities driving asset demand     |
| 9    | 17               | The passive revolution                                        |
| 10   | 18               | Private funds and the measurement problem                     |
| 11   | 19               | Banks, dealers, and intermediary asset pricing                |
| 12   | 20               | The demand for assets                                         |
| 13   | 26 (§§26.3-26.6) | Risk measurement, and risk constraints as a pricing mechanism |

Course B is why Part IV's modularity is stated rather than assumed. Weeks 1 to 4 supply Part IV's entire prerequisite list — Chapters 2-4 and 6-7 — so an instructor can teach the ecology without teaching a full asset-pricing sequence first. Chapters 11 and 12 are in the map because an asset-management elective wants them, not because Part IV depends on them, and the last week takes only the half of Chapter 26 that does not require Chapter 8's Greeks.

***

## The chapter-dependency map

Hard prerequisites only — the chapters whose machinery is used rather than merely referenced. Anything not listed can be skipped without leaving the reader stranded.

| Chapter | Requires        | Note                                                              |
| ------- | --------------- | ----------------------------------------------------------------- |
| 2       | —               | Entry point; self-contained balance-sheet primer                  |
| 3       | —               | Entry point; the spine                                            |
| 4       | 3               | Specializes $$p = E\[mx]$$ to mean-variance                       |
| 5       | 3               | Ch 4 §4.6 needed only for the starred track                       |
| 6       | 4               | Betas and the SML generalize to loadings                          |
| 7       | 3, 6            | Joint-hypothesis problem needs a model of expected returns        |
| 8       | 3               | Replication and state prices, run harder                          |
| 9       | 3               | Present value with dated payoffs                                  |
| 10      | 3, 8, 9         | Merton's model is an option on the firm; spreads are yields       |
| 11      | 7               | Informed trading is information economics applied                 |
| 12      | 7, 11           | Event studies and price impact                                    |
| 13      | 8, 9            | Duration and convexity, plus an embedded call                     |
| 14      | 2               | Opens from the master holdings table                              |
| 15      | 14, 7           | Household evidence; limits to arbitrage                           |
| 16      | 2, 3            | The book's canonical constrained-capital statement                |
| 17      | 7, 16           | Grossman-Stiglitz applied to passive ownership                    |
| 18      | 16, 17          | Delegation and performance measurement first                      |
| 19      | 3, 16           | Intermediary $$m$$ requires the SDF and the balance sheet         |
| 20      | 2, 3, 14, 16-19 | The capstone; consumes the whole ecology                          |
| 21      | 3               | A security as an allocation of cash-flow and control rights       |
| 22      | 3, 21           | Discounting, plus the boundary of the firm                        |
| 23      | 9-10, 21-22     | Cost of capital before capital structure; debt priced in Part III |
| 24      | 21-23           | Control rights, agency costs, and the payout decision             |
| 25      | 21, 23-24       | The financing menu as the holders' menu                           |
| 26      | 8, 16, 19       | Greeks, margin spirals, intermediary constraints                  |
| 27      | 7, 16, 20, 25   | Synthesis; reprises Chapter 1                                     |

![Figure 1.2: Chapter dependency diagram](https://846781005-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F3EupdX99vVBoNySDtmxb%2Fuploads%2Fgit-blob-7ec7f39a5b01c2c830922db30633befa0d9cb649%2Ffig_01_02_chapter_dependency_dag.png?alt=media)

**Figure 1.2: Chapter dependency diagram.** Directed graph of chapter prerequisites, hard requirements only — the chapters whose machinery is used rather than merely referenced. Depth is the longest path from an entry point, so prerequisite order reads left to right, and chapters are ordered within a column to minimise edge crossings rather than by number. Chapter 3 is required by nine chapters directly and by the rest through them. Part IV's hard requirements from Parts I-III are only Chapters 2-4 and 6-7, which is the modularity claim the dependency table above states in prose: the orange outline marks Part IV together with those five chapters, and the orange edges are those requirements themselves. Every other edge is grey. *Source: Author's construction from the chapter-dependency table above.*

Two readings of the table, and of Figure 1.2 above, are worth naming. The dense column is Chapter 3, which is required by nine chapters directly and by the rest through them — the reason it is the second-longest chapter in the book and the one to teach slowly. The sparse region is Part IV, whose hard requirements from Parts I-III are only Chapters 2-4 and 6-7: nothing in the ecology depends on the machinery of Chapters 8-10 or 13, and Chapters 11 and 12 supply evidence it draws on rather than apparatus it needs.

Both maps above are paths through that table, and a third built to a different semester is safe to build as long as it respects the Requires column.