78177 - Imperfect Capital Markets, Liquidity and Crises

Learning outcomes

At the end of the course student understands deeply the economics of financial markets and their interaction with the real economy. He understands the roots of the equilibrium and constrained efficiency attainable in credit markets; the nature of and the interaction between credit cycles and real cycles; the concept of liquidity and the interaction between liquidity, asset prices and real cycles.

Course contents

The goal of this course is to provide the tools for undertanding deeply the evolution and functioning of contemporary financial system, and the challenges it poses to pratictioners as well as regulators/policy makers.

To this end, we will develop the tools for understanding the nature and scope of security design (included asset securitization), the role of financial institutions in maturity transformation, provision of liquidity and functioning of financial markets; the role of collateral and repo markets; and the policies of central banks in liquidity/financial crises.

We focus on four interrelated topics:

Topic 1. Market Liquidity,  Funding Liquidity and Asset Prices  - role of Collateral and REPO Market

Topic 2. Dual Role of Asset Prices: Balance Sheet effects and Amplification of Shocks

Topic 3.  Liquidity Provision and Runs:

 - role of financial institutions in maturity transformation, provision of liquidity and functioning of financial markets;

- Securitization : REPO (Shadow) BANKING

- Central Bank Interventions  (quantitative, qualitative easing)

Topic 4.  Asset Pledgeability (collaterability) and Asset Liquidity:  Liquidity Premia and asset Prices (included Bond Spreads)

Readings/Bibliography

Readings will be detailed in class and made available in a shared folder in dropbox together with slides of the classes:

https://www.dropbox.com/sh/ykxt5mzon7egbk8/AADEofiIPR97RMIKg678mvzfa?dl=0

Attendants are strongly invited to  get access to the Financial Times  website.

Teaching methods

Lectures in class, discussion of financial events

Assessment methods

Class participation and presentation of a paper (40% ) , written essay or, at the student's choice,  written exam (60%)

Teaching tools

Slides, PC

Websites of financial press -- Financial Times, Bloomberg, The Economist

link to lecture notes and readings:

https://www.dropbox.com/sh/ykxt5mzon7egbk8/AADEofiIPR97RMIKg678mvzfa?dl=0

 

 

Links to further information

https://www.dropbox.com/sh/ykxt5mzon7egbk8/AADEofiIPR97RMIKg678mvzfa?dl=0

Office hours

See the website of Gabriella Chiesa