This document organizes the course readings by unit and session, with brief annotations indicating relevance. Full BibTeX citations are in references.bib.
Required readings are essential for the corresponding session and are testable on assessments. Recommended readings deepen understanding but are not assessable. Track-specific readings target Track 1 (Practitioner) or Track 2 (Researcher) students differently.
If you take only one reading from each unit beyond the required, take the recommended Track-aligned one.
Asaf, S. (2026). Liquidity Illusion: The General Equilibrium Theory of Private Capital Valuation. Forthcoming, 2026. 421 pp. ISBN 9798881716103.
The primary textbook for the course. All chapters referenced extensively. Available in print and electronic from the publisher; course site provides licensed access.
Asaf (2026), Chapters 1–3: - Ch. 1: “The Private Capital Valuation Problem” — frames the gap between DCF and observed reality - Ch. 2: “The Three Structural Failures” — formal statement of the failures DCF misses - Ch. 3: “Secondary Markets and the Liquidity State” — empirical evidence
Kaplan, S. N., & Strömberg, P. (2009). “Leveraged Buyouts and Private Equity.” Journal of Economic Perspectives, 23(1), 121-146.
Comprehensive overview of PE buyout structure, written for non-specialists. Essential context for understanding how PE actually works.
Sensoy, B. A., Wang, Y., & Weisbach, M. S. (2014). “Limited Partner Performance and the Maturing of the Private Equity Industry.” Journal of Financial Economics, 112(3), 320-343.
Empirical evidence on how different LP types fare in PE — provides the “what’s the actual experience” backdrop the framework explains.
Amihud, Y., & Mendelson, H. (1986). “Asset Pricing and the Bid-Ask Spread.” Journal of Financial Economics, 17(2), 223-249.
The foundational paper introducing illiquidity premium to asset pricing. Background for understanding why illiquidity is priced and why it matters.
Cochrane, J. H. (2005). “The Risk and Return of Venture Capital.” Journal of Financial Economics, 75(1), 3-52.
Demonstrates the difficulty of estimating PE returns properly; the empirical headwind that GE-LAV partly addresses.
Stafford, E. (2022). “Replicating Private Equity with Value Investing.” Review of Financial Studies, 35(6), 2799-2848.
Argues that PE returns can be replicated with public market value strategies — partly true if you accept conventional return measurement; partly wrong because of liquidity adjustment.
Asaf (2026), Chapters 4–5: - Ch. 4: “IRR, PME, and the Measurement Problem” - Ch. 5: “What a Correct Theory Must Deliver”
Kaplan, S. N., & Schoar, A. (2005). “Private Equity Performance: Returns, Persistence, and Capital Flows.” Journal of Finance, 60(4), 1791-1823.
The KS-PME methodology origin paper. Essential reading for understanding PME.
Gredil, O., Griffiths, B., & Stucke, R. (2020). “Benchmarking Private Equity: The Direct Alpha Method.” Working paper.
Provides the Direct Alpha methodology, a refinement of PME. Useful for practitioners benchmarking PE positions.
Harris, R. S., Jenkinson, T., & Kaplan, S. N. (2014). “Private Equity Performance: What Do We Know?” Journal of Finance, 69(5), 1851-1882.
The canonical empirical study on PE returns. Provides industry benchmark data the GE-LAV framework must explain.
Long, A. M., & Nickels, C. J. (1996). “A Method for Comparing Private Market Internal Rates of Return to Returns on Publicly Traded Securities.” Working paper.
Original Long-Nickels PME methodology. Background for understanding PME variants.
Korteweg, A., & Sorensen, M. (2010). “Risk and Return Characteristics of Venture Capital-Backed Entrepreneurial Companies.” Review of Financial Studies, 23(10), 3738-3772.
Methodological paper on estimating PE/VC return distributions; relevant for Track 2 students working on calibration.
Asaf (2026), Chapters 6–9: - Ch. 6: “Exit Timing and the Trapped Investor Problem” - Ch. 7: “Portfolio Construction with Liquidity Hedge Demand” - Ch. 8: “Crisis Dynamics and Regulatory Implications” - Ch. 9: “Implementation: The GE-LAV® Platform”
Robinson, D. T., & Sensoy, B. A. (2016). “Cyclicality, Performance Measurement, and Cash Flow Liquidity in Private Equity.” Journal of Financial Economics, 122(3), 521-543.
Empirical work on vintage-year effects — the data backdrop for the LP exit timing problem.
Ang, A., Chen, B., Goetzmann, W. N., & Phalippou, L. (2018). “Estimating Private Equity Returns from Limited Partner Cash Flows.” Journal of Finance, 73(4), 1751-1783.
Methodology for estimating PE returns when only LP cash flow data is available — relevant for portfolio construction work.
Ivashina, V., & Lerner, J. (2019). Patient Capital: The Challenges and Promises of Long-Term Investing. Princeton University Press.
Book-length treatment of the institutional politics around long-duration investing. Highly relevant for the practitioner track and for project work.
Merton, R. C. (1969). “Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case.” Review of Economics and Statistics, 51(3), 247-257.
Origin of Merton allocation; the benchmark GE-LAV improves on for portfolio construction.
Merton, R. C. (1971). “Optimum Consumption and Portfolio Rules in a Continuous-Time Model.” Journal of Economic Theory, 3(4), 373-413.
Extends 1969 paper; the canonical reference for continuous-time portfolio theory.
Financial Stability Board (2023). “Private Markets and Systemic Risk.” FSB Technical Report.
Recent FSB analysis of private market growth and stability concerns. Provides the regulatory context where GE-LAV insights apply.
Asaf (2026), Chapters 10–20: - Ch. 10: “Brownian Motion and Itô Calculus” (concepts) - Ch. 11: “Stochastic Control and HJB” (concepts) - Ch. 13: “Mean-Field Games” (concepts) - Ch. 14–15: “Fokker-Planck and Master Equation” (concepts) - Ch. 16–17: “LAV Operator and GE Equilibrium” (concepts) - Ch. 18–20: “Jensen, Pigouvian, Welfare” (results)
Most Track 1 students will find the math chapters challenging at full rigor. Recommended approach: read for conceptual understanding only; skim derivations; focus on results and applications.
Hull, J. C. (2017). Options, Futures, and Other Derivatives (10th ed.). Pearson.
Standard derivatives textbook. Provides background on Itô calculus, Black-Scholes, etc. at an MBA-accessible level. Use as reference for unfamiliar concepts.
Karatzas, I., & Shreve, S. E. (1991). Brownian Motion and Stochastic Calculus (2nd ed.). Springer.
The canonical graduate text on stochastic calculus. Reference for Sessions 19 (Brownian motion, Itô) and 27 (Fokker-Planck).
Pham, H. (2009). Continuous-time Stochastic Control and Optimization with Financial Applications. Springer.
The canonical graduate text on stochastic control. Reference for Session 20 (HJB) and Session 25 (HJB derivation).
Carmona, R., & Delarue, F. (2018). Probabilistic Theory of Mean Field Games with Applications (Vols. I and II). Springer.
The canonical reference for MFG theory. Essential for Sessions 21 and 26.
Pavliotis, G. A. (2014). Stochastic Processes and Applications: Diffusion Processes, the Fokker-Planck and Langevin Equations. Springer.
Comprehensive treatment of Fokker-Planck equations. Reference for Session 22 and 27.
McKean Jr., H. P. (1966). “A Class of Markov Processes Associated with Nonlinear Parabolic Equations.” Proceedings of the National Academy of Sciences, 56(6), 1907-1911.
Vlasov, A. A. (1938). “On the Kinetic Theory of Plasma.” Journal of Experimental and Theoretical Physics, 8, 291.
Sznitman, A. S. (1991). “Topics in Propagation of Chaos.” In École d’Été de Probabilités de Saint-Flour XIX—1989, 165-251. Springer.
Lasry, J. M., & Lions, P. L. (2007). “Mean Field Games.” Japanese Journal of Mathematics, 2(1), 229-260.
Cases will be distributed at session start. The following are not required but provide relevant context:
Track 1 Session 25 (PE Buyout): - Bain & Company. “Global Private Equity Report” (annual). Industry data and trends.
Track 1 Session 26 (VC + Secondaries): - Lazard / Evercore. “Secondary Market Reports” (annual). Recent transaction data and trends.
Track 1 Session 27 (Infrastructure): - McKinsey Global Institute. “The Global Private Markets Review” (annual). - Macquarie Annual Reports — specific infrastructure asset case studies.
Track 1 Session 28 (Private Credit): - PitchBook / Preqin. “Private Credit Reports” (quarterly). - Cliffwater / Lincoln. “Direct Lending Market Reports.”
Track 1 Session 29 (Digital + Climate): - Galaxy Digital, Token Terminal — recent reports on crypto/defi market. - IEA, BloombergNEF — climate infrastructure investing reports.
Track 2 Session 25 (HJB derivation): - Already covered: Pham (2009), Karatzas & Shreve (1991).
Track 2 Session 26 (MFG proofs): - Already covered: Carmona & Delarue (2018), Sznitman (1991).
Track 2 Session 27 (Fokker-Planck): - Already covered: Pavliotis (2014). - Risken, H. (1996). The Fokker-Planck Equation: Methods of Solution and Applications (2nd ed.). Springer.
Track 2 Session 28 (GE existence): - Mas-Colell, A. (1985). The Theory of General Economic Equilibrium. Cambridge University Press.
Track 2 Session 29 (Welfare and Pigouvian): - Mas-Colell, A., Whinston, M. D., & Green, J. R. (1995). Microeconomic Theory. Oxford University Press. Especially Chapters 11–13 (externalities). - Pigou, A. C. (1920). The Economics of Welfare. Macmillan. Historical origin of Pigouvian taxation concept.
Track 1 Session 31:
Track 2 Session 31:
For Track 1 students entering practitioner roles:
For Track 2 students continuing in research:
For both tracks, regulatory tracking:
If you’re continuing GE-LAV-related work post-course, build a personal stack of ~20-30 key papers organized by:
The book Liquidity Illusion serves as the anchor; everything else builds outward.