93205 - Economics of Financial Services

Learning outcomes

The course aims to equip students with the necessary tools to: (i) analyze the functional, structural, and regulatory aspects of the financial system; (ii) understand the financial and credit instruments currently available in the market; (iii) apply techniques for measuring the returns and risks of financial products; and (iv) assess the specific characteristics of financial products in relation to the needs of economic agents.

Course contents

The course aims to introduce students to the functioning of the financial system, within which households and firms interact through financial intermediaries. Particular attention is devoted to the investment needs of households (i.e., the allocation of savings) and the financing needs of firms for their investments.

The first part of the course focuses on illustrating the functions and structure of the financial system, with a primarily taxonomic purpose, aimed at familiarizing students with financial terminology and instruments. Topics include financial intermediation and the structural and functional configuration of the financial system; the relationship between real and financial variables; the analysis of the country’s financial structure through the study of intersectoral financial balances and the composition of sectoral financial portfolios. The course also examines monetary policy and the payment system. Among financial intermediaries, particular emphasis will be placed on the role of banks, analyzed from both a theoretical–economic and operational perspective through the study of their balance sheets.

The second part of the course is devoted to financial instruments and the markets in which they are traded. In a simple and intuitive manner, students will be introduced to the economic characteristics - namely, risk and return - of zero-coupon and coupon-bearing bonds, equities, and securities portfolios. Throughout the course, reference will also be made to the regulatory framework governing the financial system, as well as to the major crises - financial, sovereign debt, and pandemic - that have characterized the global financial landscape since 2008.

Part I

1. The financial system: financial operations and needs; structural and functional dimensions.
2. Financial balances: direct vs. indirect financing; the role of intermediation.
3. Firms’ financial needs.
4. The banking credit function and financing services.
5. Monetary policy: transmission mechanisms, interest rates, and the money multiplier; means of payment and the payment system (overview).
6. Banks and bank balance sheets.
7. Financial risks: credit risk, market risk, liquidity risk, operational risk; ESG (Environmental, Social, Governance) risks and sustainability in finance.

Part II

1. Financial markets.
2. Banks: theories of financial intermediation.
3. Financial instruments: bonds, equities, and portfolios.
4. Debt securities and equity instruments.
5. Risk and risk measurement; duration.
6. Financial system regulation (overview).

Theoretical and institutional analysis will be consistently complemented by empirical insights, with a focus on the Italian financial system in a broader European and international context.

Readings/Bibliography

• Ferrari A., Gualandri E., Landi A., Venturelli V., Vezzani P., “Il sistema finanziario: funzioni, mercati e intermediari”, Giappichelli Editore, 2024, VIII edizione. Capp. 1, 2, 3, 4, 5, 6.
• Ferrari A., Gualandri E., Landi A., Venturelli V., Vezzani P., “Strumenti finanziari, prodotti e servizi finanziari”, Giappichelli Editore, 2021, III edizione. Capp. 1, 2, 3, 5, 6.
• Saunders A., Cornett M.M., Otgontsetseg E., Anolli M., Alemanni B., “Economia degli intermediari finanziari”, McGraw-Hill, 2022, V edizione. Solo Cap. 12 “Bilancio degli intermediari finanziari: alcuni cenni” (solo parr. 12.2.1 – 12.2.2 – 12.3).

Other readings will be suggested during classes.

The slides used during classes are a useful tool to summarize the lectures but their study is not enough to pass the exam. Then the student will be required to integrate with what is reported on the textbook or with the articles and insights distributed during the course.

The teaching material (slides and case studies) can be downloaded by clicking on "Teaching resources on Virtuale" or directly from the "Virtuale" website (https://virtuale.unibo.it).

Any additional material will be communicated at the beginning of the course, and made available online within the course's teaching material.

Teaching methods

The course will be delivered through in-class lectures, classroom exercises, and discussion of case studies.

On specific topics of financial mathematics, practical exercises using Excel will be conducted. Additional exercises and simulations will be proposed by the instructor throughout the course.

Assessment methods

The written exam aims to assess the achievement of the following learning objectives:

1. Knowledge of the main theoretical concepts.
2. Ability to analyse economic, financial, and business phenomena through simple exercises.

The TOTAL EXAM is structured as follows:

• First section: 16 multiple-choice questions (five possible answers for each question) to be completed in 45 minutes. Each correct answer is worth 1.5 points. There are no penalties for unanswered or incorrect answers.
• Second section: three calculation-based exercises, each worth 3 points, for a total of 9 points. Each exercise has a time limit of 15 minutes.

The total duration of the examination is therefore 90 minutes, with a maximum achievable score of 33 points.

The examination takes place in person via the EOL platform using a laptop. Students who do not have access to a laptop are requested to inform the lecturer in advance, so that arrangements can be made to either take the exam in a computer lab or request a device from the university’s IT offices.

Questions are sequential: once an answer has been submitted, it is not possible to return to the previous question to review or amend it.

PARTIAL EXAMS
Two partial examinations are scheduled during the teaching period. The first will be held at the end of the first teaching module, and the second at the end of the second module. These partial examinations are designed to verify learning progress step by step.

• First partial exam: 9 multiple-choice questions (1.5 points each) and one calculation-based exercise (3 points). Maximum score: 16.5 points. Minimum passing score: 8 points. Time: 25 minutes for the multiple-choice questions and 15 minutes for the exercise.
• Second partial exam: 7 multiple-choice questions (1.5 points each) and two calculation-based exercises (3 points each). Maximum score: 16.5 points. Minimum passing score: 10 points. Time: 20 minutes for the multiple-choice questions and 15 minutes per exercise.

To pass the overall exam through partial examinations, the combined score of both must be at least 18 points.

If the student fails the exam, it may be retaken in any subsequent session. Exam grades may be declined only once, and refusal must be communicated by email to the lecturer by the next scheduled office hour.

From the first full exam session onwards, the exam will cover the content of both modules. Past exam exercises and texts, available in the course materials, may serve as examples for preparation but will not necessarily be replicated in future exams.

Grading Scale
The maximum achievable grade, for fully correct and complete answers, is 30 with honours, graded as follows:

• <18: Fail
• 18–23: Sufficient
• 24–27: Good
• 28–30: Excellent
• 30 with honours: Outstanding

No support materials (textbooks, personal notes, or electronic devices) are allowed during the exam. Registration for the exam is mandatory and must be completed via AlmaEsami [https://almaesami.unibo.it/almaesami/welcome.htm ].

Teaching tools

Teaching material: slides and discussion of case studies.

The slides can be downloaded by clicking on "Teaching resources on Virtuale" or directly from the "Virtuale" website (https://virtuale.unibo.it).

Office hours

See the website of Maurizio Mussoni