Module Directory

The objective of this course is to study the workings of the financial system, as constituted by the financial contracts and securities that are traded in markets, devoting special attention to financial intermediaries. We will analyze the reasons why and how money and credit flows from savers to entrepreneurs to create value.

Through a good understanding of the micro-structure of credit flows, students should get a better grasp of the macroeconomic consequences of regulation, monetary, and central bank balance sheet policies. The approach relies on a discussion of facts together with the analysis of formal, albeit simple, models.

The aims of this module are:

• To study the workings of the financial system, as constituted by financial contracts, securities traded in markets, the role of financial intermediaries.


• To analyze the reasons why and how money and credit flows from savers to entrepreneurs to create value.


• Through a good understanding of the micro-structure of credit flows, to get a better grasp of the macroeconomic consequences of regulation, monetary, and central bank balance sheet policies. The approach is resolutely analytical and a few simple mathematical models will be covered in class.

By the end of this module, students will be expected to be able to:

1. Evaluate empirical applications, concerning how financial systems operate and the consequences of regulation and central bank policies.


2. Learn what are financial intermediaries and why they exist.


3. Identify the main banking risks and propose management tools for these risks.


4. Comprehend the implications of on and off balance sheet items.


5. Grasp the implication of regulations on the funding and activities of banks and other intermediaries.


6. Analyze the effects of banking regulation.


7. Understand the importance of liquidity and its determinants.

Transferable Skills

Other employability skills also include the development of:

1. Awareness of the operation of financial markets in advanced economies;


2. Clear, concise and well organised answers to assigned questions;


3. Personal time management, target-setting to achieve the timely completion of term assignments and other reading assignments.

The module will be delivered via:

• Two lectures
• One (optional) class per week

in one term.

Feedback for this module will occur through class meetings where we will go over the answers to problem sets and where you will be able to ask questions about your own method of solution; answers that will be posted on moodle that will give you written guidance on the appropriate method to approach the problems on the problem sets, midterm tests and mock final; and academic support hours where any additional questions can be addressed. You should be sure that you use these methods to understand how to improve your own performance.

Lecture slides, problem sets, mock final and feedback (including solutions) are made available online via Moodle.