The past three decades have witnessed unprecedented innovations and growth in financial and capital markets, primarily arising in the context of the adoption of digital/electronic platforms and instruments. The objective of this module is to give an overview of these developments by introducing basic elements in modern finance and providing a theoretical and empirical understanding of the functioning of financial markets. The module holds up financial market theory against empirical data and events, especially the 2007 Great Financial Crisis.
The module starts with an overview of the activities of financial institutions. This is followed by a study of the transformation in traditional banking to securitized banking and the use of collateral in repo money markets. The factors that led to the 2007 financial crises will be discussed in detail. The stock markets, which show extreme boom and bust dynamics, and the electronic trading in the form of high frequency finance are covered. The role of derivatives markets is critically examined. The final topic is the recent innovation of electronic peer to peer money in the form of Bitcoin and Central Bank Electronic Currency (CBDC).
The module provides students with the following employability skills. Academic skills are enhanced through essay-writing, mathematical problem-solving and the use of ICT equipment. Students are encouraged to carry out research and information gathering for term papers and as background reading. External awareness is promoted through discussion of real world issues and learning about financial institutions and regulation. Opportunities to develop professional working skills, including teamwork and presentation skills, are provided through class discussions.
The module provides familiarity not only with theory, but also with empirical and real world challenges from the mega trends of FinTech and digital economy.
- Module Supervisor: Christoph Siemroth