MITx: Foundations of Modern Finance I

 

MITx: Foundations of Modern Finance I

Understand the Principles that Power Financial Markets and Investment Decisions

Finance is the language of value — used by businesses, investors, and policymakers to allocate resources, assess risks, and make decisions that shape economies. Whether you want to manage your personal wealth better, launch a business, or pursue a career in finance, it’s essential to master the core concepts that govern financial systems.

The MITx: Foundations of Modern Finance I course, offered through edX by the MIT Sloan School of Management, offers a rigorous and practical introduction to these concepts, taught by one of the most respected voices in financial economics.

This course is the first in a two-part series that forms the foundation for more advanced study in investment, corporate finance, and financial engineering.

Course Overview

Foundations of Modern Finance I gives learners a deep understanding of the principles of asset valuation, the time value of money, and risk-return trade-offs. It draws on real-world case studies, quantitative models, and behavioral insights to explain how and why modern financial markets work the way they do.

The course is based on materials taught to first-year MBA students at MIT Sloan, but adapted for online learners — offering world-class insights without requiring a finance background.

Meet the Instructor

Professor Andrew W. Lo, a world-renowned economist and MIT Sloan faculty member, teaches the course. He is known for:

Pioneering work in behavioral finance

The Adaptive Markets Hypothesis

Extensive contributions to risk management, hedge fund strategies, and financial regulation

Prof. Lo’s engaging teaching style combines academic rigor with real-world relevance, drawing from his experience as a researcher, author, and advisor to Wall Street and the U.S. government.

What You’ll Learn – Course Modules

Here’s what the course covers:

1. Introduction to Financial Economics

The role of financial markets in the economy

How individuals and firms make financial decisions

Financial goals: consumption, investment, insurance

2. The Time Value of Money

Present and future value concepts

Discounting and compounding

Applications in bonds, loans, and savings plans

3. Fixed-Income Securities and Valuation

Bond pricing and yield curves

Duration and convexity

Interest rate risk and immunization strategies

4. Stocks and Equity Valuation

Dividend Discount Model (DDM)

Free Cash Flow model

Efficient Market Hypothesis (EMH)

5. Risk, Return, and Portfolio Theory

Measuring risk: variance, standard deviation, beta

Diversification and the Capital Asset Pricing Model (CAPM)

Efficient frontier and investor utility

6. Market Efficiency and Behavioral Insights

Types of market efficiency: weak, semi-strong, strong

Investor psychology and decision-making biases

When markets fail — bubbles, crashes, and irrational behavior

Tools & Learning Approach

The course features:

Video lectures by Prof. Lo

Mathematical walkthroughs (using Excel or Python examples)

Problem sets and quizzes

Interactive simulations and optional case studies

Access to real-world financial data and charts

You’ll gain hands-on practice in valuing assets, constructing portfolios, and analyzing investment strategies.

What You'll Be Able to Do

By the end of the course, you'll be able to:

• Understand and apply core valuation techniques
• Evaluate investment opportunities and compare returns
• Analyze risk in individual assets and portfolios
• Understand the economic forces shaping asset prices
• Explain how psychological and market factors interact
• This knowledge is directly applicable to:
• Personal investing and financial planning
• Career paths in banking, asset management, or consulting
• Startup finance and venture capital
• Graduate programs in finance, economics, or MBA tracks

Who Should Take This Course?

Ideal for:

Aspiring financial analysts and investment professionals

Entrepreneurs who want to understand funding and valuation

Economics, business, or math students preparing for further study

Engineers and data scientists transitioning into quantitative finance

Anyone looking to deeply understand how markets work

Join Now : MITx: Foundations of Modern Finance I

Final Thoughts

Foundations of Modern Finance I isn’t about giving you stock tips — it’s about teaching you how to think like a financial economist. Whether you're managing your own money, starting a company, or working toward a career in finance, this course equips you with the tools and mindset to make smart, evidence-based financial decisions.

It’s technical, thoughtful, and incredibly well-taught — a true gem in online financial education.