ECONOMIA DEI MERCATI FINANZIARI

SECS-P/02 - 6 CFU - 1° Semester

Teaching Staff

FRANCESCO REITO
Email: reito@unict.it
Office: Palazzo delle Scienze, Corso Italia 55 Catania
Phone: 3288242694
Office Hours: ven 15-18


Learning Objectives

1. Knowledge and understanding: Preliminary theoretical and analytical knowledge of the main literature on financial markets. Introduction to the role of transaction costs, information asymmetry and risk management principles applied to securities, insurance and banking industries.

2. Applying knowledge and understanding: Interpretation of the main literature on financial markets. Ability to read and interpret the facts concerning the scope of the Economics of Financial Markets.

3. Making judgements: Discussion on the importance of asymmetric information problems and regulations of financial markets. . Interpretation of case studies with particular reference to the description and prediction of actual facts.

4. Communication skills: Development of a suitable technical language. Ability to explain and apply the theoretical concepts to specific case studies.

5. Learning skills: Class discussion and applications to case studies. Ability to apply the knowledge and skills to specific issues of Economics and Political Economy.



Detailed Course Content

Introduction to the theory of expected utility. Introduction to adverse-selection and moral-hazard problems. Model of Modigliani-Miller (1958). Model of Akerlof (1970). Model of Spence (1973). Model of Rothschild-Stiglitz (1976). Model of Stiglitz-Weiss (1981). Model of Bester (1985) and (1987). Model of de Meza-Webb (1987). Model of Bester (1994). Model of Armendáriz-Gollier (2000). Model of Ghosh-Mookherjee-Ray (2000).

20 lectures (2 h).

Each lecture will cover about 7/10 of each topic. Obviously, it cannot be predicted with accuracy how many and what topics will be covered in each specific lecture, because this depends on the difficulty of each topic, on the interest by students and on the class discussions that arise at the end of each lecture.

Topics

References

1. Introduction to the theory of expected utility

1. Ch 6

2. Adverse-selection and moral-hazard problems

1. Chs 13 and 14

3. Model of Modigliani-Miller (1958)

2.

4. Model of Akerlof (1970)

3.

5. Model of Spence (1973)

4.

6. Model of Rothschild-Stiglitz (1976)

5.

7. Model of Wilson (1977)

6.

8. Model of Stiglitz-Weiss (1981)

7.

9. Model of Bester (1985)

8.

10. Model of Bester (1987)

9.

11. Model of de Meza-Webb (1987)

10.

12. Model of Bester (1994)

11.

13. Model of Armendáriz-Gollier (2000)

12.

14. Model of Ghosh-Mookherjee-Ray (2000)

13.



Textbook Information

1. Mas-Colell, A., Whinston, m. D. and and Green, J. R. - Microeconomic theory. Oxford university press, 1995. [chapters 6, 13 and 14].

2. Modigliani, F. and Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. American economic review, 261-297.

3. Akerlof, G. A. (1970). The market for" lemons": Quality uncertainty and the market mechanism. Quarterly Journal of Economics, 488-500.

4. Spence, M. (1973). Job market signaling. Quarterly Journal of Economics, 355-374.

5. Rothschild, M. and Stiglitz, J. (1976). Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information. Quarterly Journal of Economics, 90(4), 629-649.

6. Wilson, C. (1977). A model of insurance markets with incomplete information. Journal of Economic theory, 16(2), 167-207.

7. Stiglitz, J. E. and Weiss, A. (1981). Credit rationing in markets with imperfect information. American economic review, 393-410.

8. Bester, H. (1985). Screening vs. rationing in credit markets with imperfect information. American Economic Review, 850-855.

9. Bester, H. (1987). The role of collateral in credit markets with imperfect information. European Economic Review, 31(4), 887-899.

10. de Meza, D. and Webb, D. C. (1987). Too much investment: a problem of asymmetric information. Quarterly Journal of Economics, 281-292.

11. Bester, H. (1994). The role of collateral in a model of debt renegotiation. Journal of money, credit and banking, 72-86.

12. Armendáriz, B. and Gollier, C. (2000). Peer group formation in an adverse selection model. Economic Journal, 110(465), 632-643.

13. Ghosh, P., Mookherjee, D. and Ray, D. (2000). Credit rationing in developing countries: an overview of the theory. Readings in the theory of economic development, 383-401.

Further readings will be provided during the course and made available on the webpage “Studium”: http://studium.unict.it/




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