In the 2nd edition of Asset Pricing and Portfolio Choice Theory, Kerry E. Back offers a concise yet comprehensive introduction to and overview of asset pricing. Intended as a textbook for asset pricing theory courses at the Ph.D. or Masters in Quantitative Finance level with extensive exercises and a solutions manual available for professors, the book is also an essential reference for financial researchers and professionals, as it includes detailed proofs and calculations as section appendices.The first two parts of the book explain portfolio choice and asset pricing theory in single-period, discrete-time, and continuous-time models. For valuation, the focus throughout is on stochastic discount factors and their properties. A section on derivative securities covers the usual derivatives (options, forwards and futures, and term structure models) and also applications of perpetual options to corporate debt, real options, and optimal irreversible investment. A chapter on "explaining puzzles" and the last part of the book provide introductions to a number of additional current topics in asset pricing research, including rare disasters, long-run risks, external and internal habits, asymmetric and incomplete information, heterogeneous beliefs, and non-expected-utility preferences. Each chapter includes a "Notes and References" section providing additional pathways to the literature. Each chapter also includes extensive exercises.

I. SINGLE-PERIOD MODELS1. Utility and Risk Aversion2. Portfolio Choice3. Stochastic Discount Factors4. Equilibrium and Efficiency5. Mean-Variance Analysis6. Factor Models7. Representative InvestorsII. DYNAMIC MODELS8. Dynamic Securities Markets9. Dynamic Portfolio Choice10. Dynamic Asset Pricing11. Explaining Puzzles12. Brownian Motion and Stochastic Calculus13. Continuous-Time Markets14. Continuous-Time Portfolio Choice and Pricing15. Continuous-Time TopicsIII. DERIVATIVE SECURITIES16. Option Pricing17. Forwards, Futures, and More Option Pricing18. Term Structure Models19. Perpetual Options and the Leland Model20. Real Options and q TheoryIV. BELIEFS, INFORMATION, AND PREFERENCES21. Heterogeneous Beliefs22. Rational Expectations Equilibria23. Learning24. Information, Strategic Trading, and Liquidity25. Alternative Preferences