I teach at the PhD and Master’s levels, with a focus on the interactions between financial markets and the macroeconomy, asset pricing, financial intermediation, financial crises, and sovereign debt. My courses also cover information and market microstructure in securities markets, financial stability and risk management, and interest rate and credit risk models.
PhD courses
- Financial Markets, Debt and Crises
This advanced doctoral course studies equilibrium models of asset pricing and financial intermediation and their implications for economic activity and financial crises, alongside the economics of sovereign borrowing and default under fiscal uncertainty. We analyze the role of intermediary capital and financial constraints in determining risk premia, credit allocation, and the transmission of shocks. The course contrasts asset-price amplification with mechanisms through which leverage, diversification, and firm creation jointly determine volatility and systemic fragility. Sovereign borrowing and default are studied under fiscal uncertainty, disagreement between governments and investors, and learning from market responses to fiscal announcements. Analytical and numerical methods are integrated with historical and empirical evidence on financial expansions, crises, and near-misses. Particular attention is given to measuring systemic risk, evaluating the economic costs of crises, and assessing stabilization policies.
(Selected research papers and Chapter 9 of my MIT Press book on Financial Economics)
- Information and Financial Markets
This course provides an in-depth introduction to standard theories of financial markets with asymmetric information. It aims to builds foundations regarding information efficiency, liquidity and market microstructure. It examines information aggregation in markets with diversely informed investors and also information transmission and, hence, the value of information, in markets with investors possessing superior information. A central theme of the course is the price impact of liquidity shocks. This theme is studied in competitive models with noisy rational expectations, and also in strategic market microstructure models with a number of variations including insider trading and sequential trade and imperfect competition amongst both traders and market makers. Finally, this course reviews models where arbitrage is limited, price formation in over-the-counter markets, and coordination failures in financial markets. This course is necessary before undertaking further study and research in the areas of financial markets with frictions. The course begins with a general introduction to information problems in Financial Economics, including adverse selection, moral hazard, signalling, and security design.
(Based on Chapter 5 and Chapter 10 of my MIT Press book on Financial Economics)
Master’s courses
- Financial Stability
This course provides an introduction to themes regarding the ability of the financial system to withstand shocks with the potential of affecting the functioning of the whole economy. By the end of the course, the students will be familiar with a variety of topics, including the main critical developments in contemporary financial history, the major sources of market dysfunctionalities, the feedbacks between financial and economic imbalances and, finally, an array of micro-prudential and macro-prudential tools that regulators use with the purpose of anticipating the collapse of individual financial institutions and the occurrence of financial crises. The course comprises three parts.
Part I provides background and institutional details regarding the origins of major critical events in financial history along with policy responses and arrangements: from the Great Depression of the 1930s to the Bretton Woods system and its collapse; from the 1987 crash to the ‘flash crashes’ and related dysfunctionalities of the last decade; from the 1992-93 European speculative attacks to the 1997 Asian speculative attacks; from the 1998 collapse of LTCM to the internet bubble of the late 1990s; from the credit bubble of the 2000s to the subsequent Global Financial Crisis and European Debt Crisis. This part examines the role of the regulatory framework underlying these developments as well as slowly moving causes such as the ‘global saving glut’ and faster-moving explanations regarding the very microstructure of financial markets.
Part II provides the main explanations for many of the episodes learnt in Part I: ‘bank runs’, speculative attacks, pro-cyclicality and endogenous risk, feedback effects and market discontinuities, international imbalances, public debt, sovereign default, and bubbles.
Part III describes the main analytical tools that policymakers rely on to implement both micro-prudential and macro-prudential policies. It overviews the current regulatory framework while defining new measures of individual and systemic risk relying on (i) notions of market volatility such as the VIX on a variety of asset classes and (ii) measures of market and credit risk such as VaR, Credit VaR, marginal expected and capital shortfall, market connectedness, global systemically importance, Co-VaR. This part ends with a succinct overview of the main evaluation models of sovereign default.
(I am planning to write a dedicated book on “Financial Stability” based on my lectures; Part III of these lectures currently draws from selected portions of Chapter 14 of my MIT Press book on Financial Economics)
- Interest Rate and Credit Risk Models
This course provides a grounding in recent developments in fixed income security pricing, hedging and portfolio management that insists on both conceptual evaluation methods and the many details arising in market practice. By the end of the course, the students will be familiar with a variety of topics, including (i) the institutions, organization and conduct of fixed income markets; (ii) basic methodology required to describe, analyze and hedge fixed income products, such as “curve fitting,” “bootstrapping,” duration, convexity, duration-based hedging and asset-liability management; (iii) the analysis of the “destabilizing” effects related to the use of certain fixed income derivative products; (iv) the economic forces, or “factors,” driving the variation in the entire spectrum of interest rates at different maturities; (v) relations between the yield curve and macroeconomic developments; (vi) the main evaluation tools (trees, no arbitrage trees, calibration and continuous time models), applied to a consistent pricing of a wide range of products, including government bonds, corporate bonds (convertible, callable, puttable), plain vanilla interest rate derivatives (interest rate swaps, caps, floors, swaptions, etc.); (vii) the main conceptual approaches to analyze credit markets; (viii) the process of securitization and the resulting structured products, with particular reference to collateralized debt obligations and mortgage-based securities; (ix) an overview of the main evaluation models of sovereign default.
(I introduced this course at the LSE back in 2006. My lectures are currently based on Chapters 11, 12, 13, and 14 of my MIT Press book on Financial Economics)