Financial Economics (Market, Intermediaries, Regulation)

A.Y. 2012-13

Class objective:

This class provides a one semester introduction to financial markets and intermediaries.

The required textbook for the class is Mishkin F. and S. Eakins, “Financial Markets and Institutions“, Pearson (Seventh Edition). I will provide class slides in advance (when possible) and any other teaching material on this website.

Office hours:

Nicola Borri – Tuesday after class
Alberto Sorrentino (TA) – Thursday after class (please confirm appointment by email at

Evaluation policy:

/ Announcement /

As discussed in class, I am going to give you an opportunity to re-take the midterm exam on Tuesday, April 23 in class (3:45PM). Find below the rules:
1. If you re-take your midterm, I will scrap the grade you got on the midterm of April, 9
2. If you re-take the midterm, and you get a grade equal or above 18 (passing grade), you can either take the exam on the second part of the course on May 27, or take the final on the whole class material on June, 25. But you cannot take the final on the whole class material on May 27.
3. If you retake the midterm, the weight will be 50% of the final grade.
4. The above rules apply to all of you who decide to sit for the midterm exam and get a copy of it.
5. For those of you who decide to keep the grade of the midterm exam of April 9, the weight will be 40% or 60% of the final grade depending on which gives you the highest grade.

If you have questions, please contact me by email. If you have questions on how to solve the practice problems, please contact the TA. Link to additional practice problems (pdf).

/ End of announcement /

Option # 1: midterm (9/4/13 in class) + final (equal weights; NB: final is non cumulative and is only on the first available date of examination period)
Option # 1: final on entire class material

The dates for the final are: 27/5 2PM (written) 30/5 10AM (registration); 25/6 9AM (written) 27/6 9AM (registration).

Class journal:

Class 1: Time value of money [pdf xlsx]
Class 2: Time value of money (cont’d) and discussion speech by Mario Draghi
Class 3: Bond valuation [pdf xls]
Class 4: Bond valuation (cont’d)
Class 5: Bond valuation (cont’d)
Class 6: Bond valuation (cont’d)
Class 7: Overview of financial system (pdf)
Class 8: Why do interest rates change? (pdf)
Class 9: Why do interest rates change? (cont’d)
Class 10: How do risk and term structure affect interest rates (pdf)
Class 11: TA session (practice questions)
Class 12: How do risk and term structure affect interest rates (cont’d)
Class 13: Midterm exam
Class 14: Are financial markets efficient? (pdf)
Class 15: The money markets (pdf)
Class 16: Banking and the Management of Financial Institutions (pdf)
Class 17: Financial regulation (pdf)
Class 18: Banking industry: structure and competition (pdf)
Class 19: The 2008 financial crisis and the regulatory response (pdf)
Class 20: The money markets (pdf)
Class 20: The bond market (pdf)
Class 21: The stock market (pdf)
Class 22: The foreign exchange market (pdf)

The additional TA session will be held on Thu 16/5 at 5 PM. Example on Treasury auctions (pdf). Multiple choice questions (pdf). Further exercises (pdf).

Further readings:

Note: “*” readings are required

* Speech by Mario Draghi 18/2/2013 [external link]
Speech by Peter Praet (member of ECB executive board) 29/1/2013 [external link]
* Brunnermeier, Markus, 2009, “Deciphering the Liquidity and Credit Crunch 2007-2008“, Journal of Economic Perspectives, 23, 1.


NEW: Final 25 June 213: grades (students will be able to look at their exams this Thursday during the registration of the grade)
Final (full) 27 May, 2013: grades Final (w/partials) 27 May, 2013: grades
Midterm April 23, 2013: grades – histogram – (solutions: questions multiple choice)
Midterm April 9, 2013: grades – histogram –  (solutions: questions multiple choice)


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