Money, Banking and Finance

The purpose of this 15-credit module is to provide students with an introduction to (1) multiple regression techniques using Ordinary Least Squares (OLS) estimation and (2) the principal microeconometric techniques used for analysing cross-sectional and panel data, with emphasis placed on those techniques that are instrumental in the rigorous analysis of banking data.

The final element of the MSc is the dissertation, a substantial piece of independent work conducted over the summer months through to September. The dissertation gives you the opportunity to apply research techniques and relevant economic theory to a research topic.

This module will initially introduce students to core concepts in finance like time value of money, net present value analysis and alternative investment rules to assess investment decisions taken by firms and then moves on to the introduction of basic concepts related to financial markets, including definitions of key assets and market types as well as an understanding of the economics of financial markets with a focus on their functions, participants and organisational forms.

This module will then provide students with a good understanding of fundamental theories and techniques in finance that are of concern to all financial market participants, such as bond markets and term structure of interest rates, economics of derivatives markets, forward and future contracts, swap agreements. The module will place a particular emphasis on understanding how quantitative methods and techniques are used in financial markets.

This course studies the practical operation of banking institutions. The aim is a thorough understanding of the financial environment in which we all live, including the banks’ role in the payments system and in transmitting monetary and fiscal policy. These matters are of particular relevance today given the current problems of poor economic growth, higher inflation, interest rates and government debt following the Covid pandemic and the invasion of Ukraine.

The course starts with an analysis of banks' behaviour and their balance sheets, including capital structure, lending decisions and attitudes to risk, as guided by the central bank’s choice of official interest rates and ‘quantitative easing’. This is followed by a discussion of the origins and nature of the financial crisis of 2008 and the major developments in banking regulation that have resulted.

The final part studies banking and monetary policy in the international context, including the balance of payments and exchange rates. There is a particular focus on problems in the eurozone and the operation of the Eurosystem of central banks.

Throughout this course, the treatment will generally be non-technical and will be based on the observation of institutional practices and their implications.

The course introduces state-of-the-art methods used in current macroeconomics research to understand short-run business cycle and inflation dynamics, as well as economic stabilization policies.

We will develop a broad and deep knowledge of modern Dynamic Stochastic General Equilibrium (DSGE) macroeconomic models that employ microeconomic foundations and rational expectations. These models will be solved using advanced analytical and numerical-computational approaches. More specifically, we will use the DSGE neoclassical Real Business Cycle and New Keynesian frameworks to understand the different sources of aggregate economic fluctuations, and to examine the positive and normative roles of fiscal and monetary policies.

Finally, the course examines contemporary issues such as government debt financing through distortionary taxation, optimal (un)conventional monetary and fiscal policies in a zero interest rate-liquidity trap environment, and financial frictions.

The aim of the module is to provide students with the hands-on time-series skills to competently estimate, test and interpret market-risk forecasting and control models & techniques which are required in the current regulatory environment: Value-at-Risk, Expected Shortfall, backtesting, extreme-value distributions, and copula models.

This module introduces students to those aspects of microeconomics upon which the modern understanding of financial markets, asset-price determination, and financial intermediation is built.

This module builds on the fundamental question about the role of financial intermediaries (i.e., banks) in the economy and it unfolds by analysing the economic theory behind the deposit-collecting and loan-making function of depositary institutions. The objective of this module is to equip students with a solid understanding of banking from theoretical, empirical, and regulatory perspectives. This module assumes that students comprehend the foundations of corporate finance, monetary policy, and applied econometrics.

This module introduces students to key concepts in banking regulation and supervision so as to enable them to understand the effects of changes in regulation and supervision for banks, business activities and, ultimately, the real economy. The module draws extensively on publications by central banks and regulators. The objective of this module is to equip students with the skills to comprehend and analyse sources of instabilities in the financial system and evaluate their effect on other agents in the financial system.

This module builds on and extends the concepts covered in the core Foundations of Finance module in the first term. The major topics covered include capital budgeting, capital structure, corporate valuation, corporate restructuring, merger and acquisitions, dividend policies, and application of real options in corporate finance. The analytical tools and financial theories discussed in the module are brought together through in an assessed report for which you work in groups to undertake comprehensive corporate finance analyses on a real company.

In lectures we will use cases based on real companies to demonstrate the links between the various areas of corporate finance. A key objective of the module is to help you explore how the financing and investment policies of firms interact with each other and how the decisions have implications for corporate valuation.

This module contributes to the following CFA syllabus areas:

• Corporate Finance (CFA levels I and II)

The aim of this course is to equip students with the tools necessary to enable them to make the core investment management decisions that managers face on a daily basis as well as the knowledge as to where they can find the information necessary to apply those tools. This course covers fundamental concepts and key issues in factor investing; equilibrium theories of asset pricing; mutual funds, ETFs and hedge funds; Environmental, Social and Governance; textual analysis in empirical asset pricing.

This module looks at what can happen to asset pricing in situations where market imperfections coincide with imperfections in investor rationality. It, therefore, explores the boundary between mispricing which can be exploited and that which cannot be exploited profitably.

The module lays the foundations for arbitrage, investment and wealth management, investment banking, and corporate finance. The material covered is at the frontier of academic and industry research, forming a conceptually advanced body of knowledge (CFA level III) which is of relevance for theory, research and practice.

Topics covered include:

• The efficient markets hypothesis and competing theories
• Limits to arbitrage
• Heuristics, biases and prospect theory: mental accounts and evidence in market prices
• Myopic loss aversion, disposition effect and overtrading
• Professional investors and analysts: over- and under-reaction
• Bubbles: observational and experimental, rational and non-rational
• Closed-end fund discounts, co-movement and sentiment
• The equity premium puzzle and the volatility puzzle
• Herding
• Behavioural portfolio theory

Turbulent decades of economic crises and increased volatilities across all asset classes have brought about innovative and strategic derivatives solutions to manage financial risk and create value. Their failure has typically been due to a lack of understanding of how to use and price derivatives. Understanding derivatives’ dynamics, risks, valuations and uses has become more important than ever.

Although there is a plethora of derivatives structures, the key to understanding derivatives is that all financial products, no matter how complex, are portfolios of just two fundamental building blocks: a swap (forward) and an option. This course provides this understanding in a rigorous, consistent and coherent framework.

This module equips you with the latest skills in data science, financial econometrics and quantitative finance to analyse and model asset price dynamics using techniques at the research frontier in these areas, including the work with high-frequency data, relevant for the job market (especially in Quants) and the MSc dissertation streams.

It will teach you important features of financial time series, key modelling approaches in the field, how to use high-frequency data to construct the latest volatility estimators and the most appropriate methods for forecasting price volatility and risk. It will also give you practical experience of analysing market prices, constructing volatility estimators and designing forecasting analyses through empirical projects implemented with MatLab.

The financial markets and the world of investment management have undergone significant change since the global financial crisis. Investment managers need to keep abreast of these developments and take advantage of such changes. This module introduces the key changes in market conditions, including high-frequency trading, dark pools and the move to bring off-exchange instruments such as credit derivatives, on exchange. Within the world of investment management, we look at developments in liability-driven investment, alternative investments and new approaches to diversification.

The key objectives are to:

• Endow students with an understanding of today’s financial markets, trading processes and decision-making (also on a high-frequency level)

• Endow students with the concepts and ideas of advanced portfolio analysis

• Endow students with an understanding of the subtleties of investment decisions and dealing with clients

• Endow students with the relevant quantitative skills in this area for further advanced studies

Designed to develop your understanding of the principles governing the valuation of fixed income securities and their derivatives, this module examines the main problems and selected issues relevant in the management of interest rate risk, and the organisations and structure of debt markets. Topics covered include debt securities and markets, the measurement of interest rate risk, and embedded options and interest rate derivatives.

This module contributes to the following CFA syllabus areas:

• Debt Investments (CFA levels I, II and III)

The purpose of this module is to give students a very solid grounding in the quantitative empirical research skills that are necessary in producing high-quality research, both in the academic as well as in the applied context, in the areas of empirical asset pricing and portfolio allocation.