Money Electives

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.


Topics in Money and Macroeconomics

This course focuses on selected topics in monetary economics of current interest. Students are introduced to monetary models of the economy using formal analysis. They will learn quantitative methods for applying such models to current policy questions. For example, the course covers New-Keynesian models with price and wage rigidities. The models are implemented and simulated using Matlab. Possible questions to be addressed include the design of monetary policy rules, the interaction of fiscal and monetary policy, international spillovers and exchange rate dynamics.

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.

Financial Structure and Monetary Transmission

This course focuses on the role of financial intermediaries and financial markets in the transmission of monetary policy. In the first half, models of financial intermediaries based on asymmetric information between borrowers and lenders are developed and integrated in macroeconomic models. These models are then used to study the role of borrowers’ net worth or collateral in propagating and amplifying economic fluctuations. The second half of the course focuses on monetary policy transmission through the term structure of interest rates. Term structure models are introduced to explain term premia as driven by either unobserved or macroeconomic factors. These models are then used to jointly forecast the macroeconomy and the yield curve.

Central Bank Watching

This course reviews how central banks go about determining what level of interest rates to set. Since prices of financial securities depend on the level of interest rates, which is largely determined by the central bank, “central bank watching” is a big industry in the financial sector. Understanding the process leading to interest rate decisions is also important for financial journalists and those working in central banks. Core topics include: the framework of monetary policy, measuring inflation, measuring the output gap, interest rates and the Taylor rule, the monetary transmission mechanism, the term structure of interest rates, the role of money in monetary policy, and monetary policy committees.

International Macroeconomics

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.

International Money and Finance

This elective course provides (i) a thorough yet accessible presentation of the methods that econometrics currently has to offer to analyze time series and panel data in international money and finance and (ii) a discussion of models of exchange rate determination that are at the core of the open economy macroeconomics literature. The course emphasizes the hands-on application of the methods and models discussed to empirically study the dynamics and determination of exchange rates. A number of classes will therefore take place in the PC laboratory (using STATA), and course participants are expected to complete assignments in STATA. At the end of the course participants should feel comfortable to do independent, economic theory based empirical work using time series and panel data as arising in many areas of macroeconomics and finance. The course presumes that participants have mastered the material in the first-year core courses in macroeconomics and macroeconometrics. 

Household Finance

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.

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. 

Fiscal and Tax Policy in the EU

The course presents the economics of the European Union from a public finance perspective. Special attention is given to issues like decision making in the EU, tax harmonization, EU expenditures, the subsidiarity principle, and optimal fiscal federalism. The course is designed to give an understanding for the developments and institutions in these policy areas and to allow students to evaluate policy options for the future.



Finance Electives

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.

Commercial Banking

Product innovations such as credit derivatives and asset backed securities as well as new approaches for pricing and portfolio management have made credit risk management one of the hottest and most important topics in today’s capital markets. This course introduces students to the major concepts and instruments for the management of credit risk in both capital markets and banking institutions. Students will become familiar with the products used in today’s credit markets such as corporate bonds, convertible bonds, collateralized debt obligations (CDO’s), asset backed securities (ABS) and several kinds of credit derivatives like for example credit default swaps (CDS). The course discusses the application of these products as well as pricing issues for the purpose of credit risk trading. Students will also learn how internal and external rating methods are used by banks and investors as a main ingredient in pricing and evaluating credit risk. This section includes state-of-the-art industry models like KMV’s EDF® model. Another part of the course concerns the application of modern portfolio management approaches for credit risk. Students will learn how some selected industry models are used for the optimization of credit portfolios and the analysis of securitization transactions. The course also covers briefly regulatory aspects like the new capital adequacy requirements of Basel II.

Integrated Risk Management

This course addresses how corporations should manage the risks they face. The focus is on developing an integrated approach that looks upon risk management as a part of corporate strategy. As part of their business, firms constantly take, or are exposed to, risks. However, they also have varied possibilities to deal with these risks. They can attempt to avoid or reduce risk, transfer it by using insurance or derivatives, or bear the risk themselves and adapt their capital structure or increase their operational flexibility accordingly. Participants of this course will study the potential consequences of risk for the operations of a firm, learn to identify and assess single risks, potential interactions between risks, and the aggregate risk of a corporation, and understand how frictions in the insurance market and the capital market determine the optimal risk management strategy. The course targets not only students who later want to work in risk management but also those with in interest in corporate finance and corporate strategy. 

International Banking: Financial Systems

The course first covers financial systems and especially banking systems in different industrialized countries such as Germany, UK, USA, and France. The overriding question is the extent to which these banking and financial systems differ between countries and whether there is a general convergence of financial systems. The course then studies banking and finance in developing and transition countries. After looking at the relationship between finance and development and development aid policies that try to foster sound financial development in developing and transition countries, the course takes a close look at micro and small enterprise finance in these countries. 

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.