The following is an indicative list. Not all courses are necessarily offered every academic year; and the program may be enriched with further courses when appropriate and feasible.
Monetary Theory and Policy
The course “Monetary Theory and Policy” addresses monetary policy issues from both a theoretical and a policy-oriented perspective. Topics include the determinants of money supply and money demand, issues in monetary policy implementation, real effects of inflation and various aspects of the monetary transmission mechanism. Using recent New-Keynesian models, we discuss the role of time-consistency and of credibility for the conduct of optimal monetary policy.
This course will cover three main topics. In the first part we introduce basic concepts and theories of modern international macroeconomics, like the determination of the current account, international prices, and the role of international financial markets. The main framework of the analysis is the inter-temporal approach to the current account. We will start by deriving the current account equation for a small open economy with one good, one internationally traded asset in the deterministic case. We will therefore add uncertainty, investment, durable goods, government expenditure, endogenous labour supply. For each of those cases we also discuss the testable implications of the theory. At last, we move to the two good model and discuss the Harrod-Balassa Samuelson effect. In the second part we will move to the international real business cycle literature. The goal of this research is to understand and explain business fluctuations and their international transmission. We will first introduce the basic model of international real business cycle (Backus, Kehoe and Kydland JPE 1985) which is a stochastic dynamic general equilibrium model with endogenous labour supply and two goods aggregated via an Armington aggregator. After discussing the implications of this model we will overview the major puzzles in international macroeconomics: Feldstein-Horioka, the home bias in consumption and home bias in investment, Mussa puzzle, disconnect puzzle, Backus-Smith puzzle, output-investment-employment correlation puzzle. Finally we will briefly introduce the most recent new open economy literature whose models depart from the international RBC literature because of the addition of nominal frictions.
This course presents topics in the rapidly growing area of Household Finance, on the interface between Macroeconomics and Finance. Households are increasingly involved in portfolio choice and management, especially since governments are shifting to them responsibilities for financing retirement in view of the demographic transition. The course focuses on theoretical and empirical analysis of factors influencing household choices regarding participation, as well as levels of holdings, in various types of assets and of debts, including stocks, private businesses, housing, and credit card debt. Emphasis is placed on use of modern household-level data bases, and on international comparisons made possible by such data (using STATA). Lessons regarding the role of household characteristics, attitudes, and financial sophistication in determining financial behavior are useful both for financial practice (e.g. design and marketing of financial products) and for monetary policy design (e.g. assessing distributional effects of policy changes).
Europe and the US: Comparative Economic Analyses
This course analyzes differences in the economic systems, economic outcomes, and preferences for economic policies between Europe and the US. Topics include the welfare state, taxation, labor markets, demographics, preferences for redistribution, migration, monetary and fiscal policy, and the educational system. The course studies both the origins of potential differences, as well as their consequences for the lives of people. We explore macro- as well as microeconomic studies of both theoretical and empirical nature. However, a focus on the course lies on empirical studies and empirical methods, and advanced knowledge of econometrics is a prerequisite.
This course covers several topics at the intersection of macroeconomics and finance. These include an analysis of supply and demand factors in credit markets, the link between debt and economic recessions, the role of financial wealth on consumption and employment, the emergence of asset price bubbles, fiscal policy, macroprudential policy, monetary policy, and quantitative easing. The goals are to understand, reflect and apply state-of-the art theories, as well as to develop a factual knowledge from different fields and to apply it in the professional practice.
Labor Markets and the Macroeconomy
The course surveys various topics at the intersection of labor economics and macroeconomics, using both empirical and theoretical approaches. We cover human capital and earnings inequality, structural and frictional unemployment, search and matching models of the labor market, frictional wage dispersion, business-cycle theories of the labor market, as well as labor market policy such as unemployment insurance, job protection legislation and minimum wages. Prerequisites are microeconomic and macroeconomic theory and econometrics.
Monetary Policy, Inflation, and Business Cycles
The course discusses macroeconomic models designed to study monetary policy. Specifically, we will analyze if and how monetary policy can influence real variables such as output, employment, and growth as well as monetary variables such as interest rates, inflation, and the price level. Further, we will study the interaction between monetary and fiscal policy and their joint impact on the economy.
Public Finance in Macroeconomics: Heterogenous Agent Models
We will study variants of the three ”workhorses” of dynamic macroeconomics in general equilibrium. While all these types of models will be analysed, most room will be given to life-cycle economies (OLG applications). For this reason, we will start out by extensively studying partial equilibrium models of household behaviour, e.g. the dynamics of consumption, savings, labour supply and portfolio allocation decisions over the life-cycle. Once we roughly understand these models, we will turn to general equilibrium models. Our general equilibrium discussion will then cover models with idiosyncratic risk (e.g., individual unemployment shocks that, in each time period, affect only a fraction of agents in the economy) and, if time permits, also models with aggregate risk (e.g., productivity shocks that simultaneously affect all agents).
The Economics of Taxation
Tax measures are ubiquitous and form important tools of public policy with often large behavioral effects. The course provides a sound understanding of the allocative and distributional effects of taxation and deals with topics like international taxation, environmental taxation and the optimal income tax.
The following is an indicative list. Not all courses are necessarily offered every academic year; and the program may be enriched with further courses when appropriate and feasible.
Advanced Corporate Finance
This elective course is designed to provide students with a deep knowledge of the modern theory and practice of corporate finance and to confront them with the most important policy and research questions currently debated in the field. It builds upon the material covered in the two first-year core finance courses and discusses a series of important corporate finance issues, structured around the life-cycle of the firm. Starting with entrepreneurial issues including start-up and firm growth (staging), it then turns to the classical areas of the mature firm, i.e. optimal leverage ratio, and of decisions of going public and going private, together will its corporate governance implications. The last section of the course discusses the new role of financial markets in corporate decision making, as it is prevalent in much of the current debate on, e.g. merger and acquisitions, leveraged buy-out, outsourcing, or financial restructuring. These issues will often be discussed by relying on various financial instruments and strategies, like bank debt, leasing, market equity, and options. There is an emphasis on empirical work, both in the literature and in applications during the course. Students are required to work out several tailored cases that will require (or contribute to) a deeper understanding of empirical methods.
This elective course focuses on valuation of derivative securities. Topics include an introduction to the different instruments and their payoffs, the binomial and the Black-Scholes model, implied volatility, option sensitivities (“greeks”), exotic options, and numerical methods. Furthermore, the course contains a discussion of more sophisticated approaches to option pricing, including stochastic volatility. Another topic will be risk management with derivatives, with a special emphasis on interest rate and credit risk. Finally, the course offers an introduction to the valuation of real options, i.e. contingent claims embedded in investment projects.
Advanced Investment and Pension Finance
The objective of this elective course is to familiarize students with the advanced concepts and techniques of modern investment management. The perspective will be mainly that of institutional investors (e.g. asset management companies, insurance companies, pension funds). Among the subjects covered are: the portfolio construction under shortfall risk constraints, the use of multi-factor models in asset management, modeling investment risks, as well as strategic, tactical, and dynamic asset allocation techniques of internationally diversified portfolios. Moreover we look on the asset liability management strategies of pension funds, and retirement income planning techniques for individual investors. Further topics include the application of derivatives in portfolio management. Complementary exercises and case studies focus on deepening the participants' grasp of the subject by offering hands-on practical experience.
Stochastic Calculus in Finance and Econometrics
This elective course discusses stochastic processes and stochastic integrals constructed from Wiener-processes. In particular, Ito’s Lemma is treated, and conditions for convergence to stochastic integrals are studied. At the end of the course students will be able to solve stochastic differential equations which are used to model dynamics, e.g. interest rate dynamics in mathematical finance. Moreover, the limiting distribution theory of modern time series econometrics (nonstationary and cointegrated time series) will be presented. The course presumes that participants have mastered the material in the first-year core courses.
This course aims at equipping students with the most relevant fundamental methods of Quantitative Portfolio Management. While thoroughly introducing the theoretical concepts, the particular focus of this lecture will be on aspects of their implementation in the investment practice. We will look at strategic as well as tactical asset allocation for equity and bond portfolios, portfolio insurance strategies and the fundamentals of asset-liability management. Another focus of the course is on passive and active equity portfolio management. The course is completed by an introduction into risk models.
Mergers and Acquisitions
Corporate managers and their professional advisors must be familiar with major corporate restructuring transactions. These include mergers & acquisitions (M&A), but also sell-offs, spin-offs, equity carve-outs, share repurchases, and leveraged recapitalizations among others. This interdisciplinary course draws from finance, economics, law, accounting and strategy to build a framework for understanding these transactions. The course takes seriously the often-conflicting goals of key players - directors, managers, stockholders, creditors, and employees - each trying to maximize their own interests subject to various behavioral, legal, and market constraints. The course begins with an examination of the structure and governance of the public corporation. The conflicts of interest between corporate managers and stockholders, which are often key issues in M&A transactions, are identified and the market forces and legal rules that help to resolve these conflicts are discussed. The course also provides practical training in the various valuation techniques that real-world managers and professional advisors use to evaluate restructuring transactions. Students are expected to use these techniques to analyze the restructuring transactions under discussion. At the same time, the course deals straightforwardly with the limits of these techniques. Next, the course covers the theoretical rationales for each of the various restructuring transactions. The available empirical evidence is examined to help sort out which motivations are most important and to shed light on how the transactions impact the welfare of managers, stockholders and other corporate stakeholders. Students completing the course successfully should be well positioned to better understand and take part in major corporate restructuring efforts, without falling prey to ”black-box” analytical arguments that often hide the complexity and uncertainty of the restructuring landscape.
International Financial Architecture
Building on methodologies and instruments acquired in compulsory courses in earlier semesters, the lecture series entitled ”International Financial Architecture” takes a practical view on the realities of today’s global financial markets. Starting with an overview of the most important capital and banking markets, the series continues to review major industry and product trends. A further key topic will be the degree of integration of global and regional financial markets in selected market segments and infrastructure. Particular attention will be devoted to financial crises and market failures and the possible remedies. Finally, regulation and supervision as potential mitigants for financial market failure will be reviewed.
Hedge Fund and Alternative Investments
The course will analyse hedge fund strategies and introduce financial instruments necessary to implement these strategies along the way. The goal is to make students familiar with different types of strategies and to understand the economic origins of short- or long-term return predictability. Topics include: Intro to hedge funds, Carry, Momentum, and Value, Fixed income arbitrage, Macro strategies, Asset allocation decisions, Smart Beta.
Financial Econometics of High Frequency Data
The objective of this course is to introduce students to recent developments in analysis of financial data both time series and cross-sectionally including highfrequency financial data. This course assumes a basic knowledge of the econometric tools and will focus on their application to financial data both time series and cross sectionally. The course includes introductory lectures on MatLab/Stata programming as well as the use of Bloomberg terminal and Eikon data.The course will be a mixture of presentations by the instructor and practical classes. Students will be also required to complete home-work assignments, which includes working with data.
Complex Networks - Methods and Algorithms
Many complex systems in nature, technology or society can be represented as networks consisting of nodes connected by links. Such an approach has not only revealed structural regularities in different types of systems, e.g. food webs and social networks, suggesting common underlying mechanisms and concepts, but is also used to study the influence of the corresponding network structure on the behavior and function of the system. Recently methods from complex network theory have been applied to financial data and models, often to access systemic risk arising from the interconnections of the corresponding systems. This course represents an introduction to concepts and methods from complex network theory. Topics include: basic network models; sampling techniques; spreading, percolation and cascade processes on networks; network control; network models for financial systems.
Commercial Real Estate Finance
This course provides an overview of different aspects of commercial real estate finance. The first part of the lecture presents different valuation techniques for private and public commercial real estate. The second part discusses data challenges in measuring property returns and presents econometric methods for index construction. The third part covers the debt side of commercial property investments and the pricing of commercial mortgage backed securities. The course aims to provide students with an advanced knowledge of income-producing properties and commercial real estate markets. The course offers several R exercise sessions, in which the learned methods are applied to real estate data.
Banking Risk Management Frameworks
Risk management is a core competency of banks. Nevertheless, the financial crisis has demonstrated that while risk models are fairly advanced at a number of banks, risk culture and risk governance is still not fully developed at many banks. Thus, this course focuses on the qualitative elements of risk management, including relevant regulatory requirements. You will become familiar with the following topics: International and national banking regulation (Basel I, II and III, CRD II to IV, SolvV, MaRisk), Governance of risk management (Three lines of defence model, role of the CRO, roles of risk committees), Risk strategy and appetite (Business and risk strategy, limitation of risks), Risk management processes for Pillar 1 risk types (market risk, credit risk, OpRisk), Risk management processes for Pillar 2 risk types (reputational risk, strategic/business risk, liquidity risk), Risk mitigation strategies (hedging, risk transfer, avoidance etc.) , Risk reporting & disclosure (management and regulatory reporting on risk),
Advanced Behavioral Finance
There is ample evidence that the assumption that agents always make rational decisions in financial markets does not accurately describe what is observed in reality. The research field of Behavioral Finance analyzes how systematic deviations from rational behavior affect individual investor’s decision making as well as aggregate capital market outcomes. The course starts with an introduction to the most important biases in financial decision making. Then, typical patterns in buying and selling decisions of investors as well as long-term investment decisions like saving for retirement are discussed. In the second part of the course, the influence of these heuristics and biases on aggregate market outcomes is analyzed. In this context, different types of market efficiency and the concept of ”limits-to-arbitrage” are discussed. Subsequently, the most prominent return predictabilities in the cross-section of stocks returns and their potential behavioral explanations are introduced. The course concludes with an outlook on behavioral corporate finance.
Microstructure of Financial Markets
In the traditional approach to financial economics the price formation process is a ‘black box’ in which there is no explicit role for financial market structure. However, the way securities are actually traded is far removed from the idealized picture of a frictionless and self-equilibrating market. Market microstructure is the study of the process and outcomes of exchanging assets under explicit trading rules. Two key concepts of real-world markets – liquidity and price discovery – are central to understand the impact of these rules on the behavior of institutional investors, broker-dealers, and other market participants. Recent developments in financial markets brought about by technological advancements and regulatory initiatives (such as MiFID in the EU) have led to far-reaching changes in the structure of secondary markets. Examples of such changes include the advent of algorithmic and high-frequency trading, increased market fragmentation and popularity of alternative trading venues such as dark pools. This course provides an intermediate level treatment of several issues involved in understanding the microstructure of modern financial markets. The course is important if you are (or aim to work for) a trader, broker, hedge fund, asset manager, exchange operator, or market supervisor.
Insurance and Finance
Insurers are the second main pillar in the financial system, next to banks. Insurers employ 1 million people in the European Union; they hold €10 trillion financial assets and have virtually every household and every corporation as a customer. Insurers are often wrongly equated with banks but have a fundamentally different business model. Insurers have an important role in the economy. They allow risk taking and thereby foster innovation and growth; they can act as stabilisers in the financial system due to their long-term investments and they create social financial networks through the mutualisation of risks. This course gives a concise and rigorous insight into the purpose, role and regulation of insurance.