This course applies microeconomic models to the optimal choice problems of agents operating on financial markets such as households, firms and financial intermediaries. We will therefore use models of optimal intertemporal choice even in the presence of uncertainty and/or asymmetric information. This analysis will allow us to understand the fundamentals underlying the equilibrium on financial markets and the forces that influence the price of securities.
Economia dei mercati finanziari, Pagano M. Pandolfi L. e Puopolo G., Il Mulino, Bologna, 2020. Economia dei mercati finanziari, G. Cassese, Carocci, Roma, 2018. More materials, freely accessible on the web, will be indicated in class.
Learning Objectives
At the end of the course, students should have the knowledge and the ability to apply the main models of choice of investors, companies and financial intermediaries. They will also show to know the potential and limitations of some of the main financial markets models.
Prerequisites
The Microeconomics exam is a prerequisite. It is also recommended that students have some basic knowledge of financial mathematics. Some of the contents covered will have references to the programs of Banking and financial system and Corporate finance, but it is not necessary to have taken them. Some topics covered in the course are further developed in the Laboratory of Quantitative Methods for Portfolio Choices (aka Financial Mathematics Laboratory).
Teaching Methods
Lectures, exercises, laboratory experiments.
Type of Assessment
Written exam with 3-4 exercises to be carried out in 2h. There is no oral exam. The final evaluation will also take into account participation in the activities proposed during the course (ongoing exercises, experiments)
Course program
Structure and functions of financial markets. Intertemporal choices and determination of the price of securities in conditions of certainty. Choices in conditions of uncertainty and portfolio problems. Mean-variance preferences, market equilibrium and CAPM model. Bank choices in the presence of uncertainty and asymmetric information: credit rationing and the role of guarantees. Introductory economic analysis of some corporate finance problems. Financial market instability, speculative bubbles and bank runs.