FIE448 Banking and Financial Innovation
Autumn 2018Spring 2019
This is a master-level course consisting of the basic microeconomic theory of banking, financial innovation, and financial crisis, and discussion of practical issues related to these theories.
- Introduction : Banking, financial innovation and financial crisis.
- The role of financial markets : Why do we need financial markets? The role of financial markets and transaction costs in financial markets.
- Existence of banks : 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.
- Financial innovation : The underlying theory of certain financial innovation. How did securitization contribute to the 2008-2009 financial crisis?
- Bank runs, financial crisis and regulation : Why bank runs? How to stop a bank run? What is special in the 2008-2009 financial crisis? Introduction to banking risk management and regulation.
- FinTech : The new developments in the banking sector. For exampoe, can FinTech kill banks?
After this course, students are expected to
- Understand the important economic roles of financial intermediaries, such as the role of commercial banks, investment banks and other financial intermediaries, both in theory and in practice.
- Understand the main businesses and products of banks, especially those of commercial banks, both in theory and in practice. These products reflect the economical roles of banks and are linked to various risks of banks.
- Understand bank runs and how it can start a financial crisis, both in theory and in practice. Especially, the 2007-2009 Financial Crisis were initiated from the subprime crisis and runs on repos.
- Understand how various bank regulations to prevent or stop a bank run or financial crisis, both in theory and in practice.
- Understand recent financial innovation in the banking sector and their underlying motives, both in theory and in practice. Know how securitization "creates" the 2007-2009 financial crisis.
- Know the new developments in the banking sector, such as FinTech, and be aware of the main FinTech advances and their motives.
Skills and General Competence:
- Using the concepts, methods and knowledge that are introduced in the course, you should be able to analyze and write professional reports, articles and business cases concerning banking, financial innovation (FinTech) and financial crises.
- Through the course, you should have developed good analytical skills, have learned to work independently with advanced problems in banking, and be capable of applying new knowledge throughout your career
Requirements for course approval
Two approved mandatory assignments. You are encouraged to collaborate on the term paper. Each team should have 1 to 3 members, and you hand in one solution per team.
Final exam, comprising a 4-hour written school exam. The exam will be given only in English and has to be written in English.
Grading scale A - F.
The course material consists of selected articles from academic journals, lecture notes (provided by the lecturer at the beginning of the course) and lecture slides .
- ECTS Credits
- Teaching language
Xunhua Su, Department of Finance