Banking and Financial Crisis

FIE448 Banking and Financial Crisis

  • Topics

    Topics

    This is a master-level course consisting of the basic microeconomic theory of banking and financial crisis.

    • Introduction to banking and financial crisis.
    • Why do we need financial markets? The role of financial markets, and transaction costs in financial markets.
    • Why does bank exist? Functions of banks; the model of bank loans; agency problems (adverse selection and moral hazard) and the design of loan contracts.
    • Why financial crisis? Why bank runs? How to stop a bank run? What is special in the 2008-2009 financial crisis?
    • Securitization and financial innovation. How did securitization contribute to the 2008-2009 financial crisis?
    • Introduction to bank risk management and regulation.

  • Learning outcome

    Learning outcome

    After this course, students are expected to

    1. Understand the economic models concerning the roles of financial intermediaries in an economy, such as the role of commercial banks, investment banks and other financial intermediaries. Use the theory to analyze relevant economic issues and link theory to practice.
    2. Know the underlying economic theory of the main businesses and products of banks, especially those of commercial banks such as deposits, bank loans, and securitized products. These products reflect the economical roles of banks and are linked to various risks of banks. Use the theory to analyze relevant economic issues and link theory to practice.
    3. Understand the economic models of bank runs and the mechanisms through which bank runs create financial crises. Especially, understand how the 2007-2009 Financial Crisis were initiated from the subprime crisis and runs on repos.
    4. Be aware of the main risk management models of banks and bank regulations. Use the theory to analyze relevant economic issues and link theory to practice.
    5. Using the concepts, methods and knowledge that are introduced in the course, you should be able to understand and analyze professional reports, articles and business cases concerning banking and financial crises.

  • Teaching

    Teaching

    Plenary lectures.

    There will be three non-mandatory assignments for students to prepare for the final exam.

  • Requirements for course approval

    Requirements for course approval

    Approved mandatory term paper. You are encouraged to collaborate on the term paper, but not required to do so. Each team should have 1 to 3 members, and you hand in one solution per team.

  • Assessment

    Assessment

    Final exam, comprising a 4-hour written exam. The exam will be given only in English and has to be written in English.

  • Grading Scale

    Grading Scale

    Grading scale A - F.

  • Computer tools

    Computer tools

    None

  • Semester

    Semester

    Autumn. Not offered 2017.

  • Literature

    Literature

    The course material consists of selected articles from academic journals and lecture notes based on the articles.

Overview

ECTS Credits
7.5
Teaching language
English
Semester
Autumn

Course responsible

Xunhua Su, Department of Finance