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.

Kerry Back is the J. Howard Creekmore Professor of Finance at Rice University's Jones Graduate School of Business and a Professor of Economics in the Rice University School of Social Sciences. He previously served on the faculties of Northwestern University, Indiana University, Washington University in St. Louis, and Texas A&M University. At Washington University in St. Louis, he served as the Associate Dean for Academic Affairs of the Olin School of Business and was named a University Distinguished Faculty Member. He received faculty research awards at Texas A&M and at Rice University. Currently, he teaches introductory and advanced asset pricing theory to PhD students in the Jones School and in the Department of Economics. His research interests are in the areas of investments and market design, and he has served as an editor of the Review of Financial Studies, a co-editor of Finance & Stochastics, and an associate editor of the Journal of Finance and other journals.

I. SINGLE-PERIOD MODELS
1. Utility and Risk Aversion
2. Portfolio Choice
3. Stochastic Discount Factors
4. Equilibrium and Efficiency
5. Mean-Variance Analysis
6. Factor Models
7. Representative Investors
II. DYNAMIC MODELS
8. Dynamic Securities Markets
9. Dynamic Portfolio Choice
10. Dynamic Asset Pricing
11. Explaining Puzzles
12. Brownian Motion and Stochastic Calculus
13. Continuous-Time Markets
14. Continuous-Time Portfolio Choice and Pricing
15. Continuous-Time Topics
III. DERIVATIVE SECURITIES
16. Option Pricing
17. Forwards, Futures, and More Option Pricing
18. Term Structure Models
19. Perpetual Options and the Leland Model
20. Real Options and q Theory
IV. BELIEFS, INFORMATION, AND PREFERENCES
21. Heterogeneous Beliefs
22. Rational Expectations Equilibria
23. Learning
24. Information, Strategic Trading, and Liquidity
25. Alternative Preferences