University of Liege | Version française
Academic year 2014-2015Value date : 1/10/2014
Version 2013-2014
FINA0062-1  Financial Economics

Duration :  30h Th
Number of credits :  
Master degree in Economics, professional focus in Economics and Finance, 2nd year5
Master degree in Business Engineering, professional focus in Financial Engineering, 2nd year5
Lecturer :  Georges Hübner
Coordinator :  Georges Hübner
Language(s) of instruction :  
English language
Course contents :  
This course provides insights into the economic modeling of financial markets, institutions and instruments. The course is divided in four parts:
1: Preferences for Risk and return. This part studies the main aspects of financial risk and returns at rational expectations equilibrium and the sources of deviation from this equilibrium. A particular focus is brought on the influence of the preference structure of economic agents on the notions of "risk" and "risk premium". Applications are provided in the field of asset pricing.
2. Financial economics and portfolio management. Building on the previous part, the course reviews the performance management and measurement framework consistent with investor's preferences.
3: State prices and the pricing of contingent claims. We review the notion of state pricing and the applications in the fields of market completeness and interest rate modeling. The application features the development and parameterization of term structure models.
4: Macro-finance and the analysis of crises. A special topic is devoted to the critical analysis of the financial crises of the 21st century, with a particular focus on the 2007-08 banking crisis and the 2010-12 sovereign crisis. The impacts of these crises on the financial system is particularly considered.
Finally, the course prioritizes contacts with market professionals as selected guests intervene during some sessions.
Learning outcomes of the course :  
The course pursues the following objectives:
1. To endow students with the basic insight regarding the formation of financial prices at equilibrium and the deviations thereof.
2. To provide students with the body of knowledge necessary to understand the interactions between financial markets participants and regulators.
3. To train students to the application of interest-rate theory to fixed-income portfolio management, and to the analysis of academic papers.
4. To confront students with real issues through the experience of high-level market practitioners. Intended Learning Outcomes addressed by the course :
  • Gaining the knowledge and understanding of one of the following fields: supply chain management, financial engineering, performance management systems or intrapreneuriat; being able to mobilize them in order to solve concrete management problems or cases
  • Ability to speak 2 foreign languages: C1 in English and B2 in one other language
  • Capacity to research autonomously and methodically the information needed to solve a complex, transversal management problem, to perform a rigorous analysis of it and to suggest pertinent solutions
  • Understanding and being capable of using modelization methods when seeking a solution for a concrete management problem
  • Being capable of professional team work
  • Professional capacity for oral communication
Prerequisites and co-requisites/ Recommended optional programme components :  
An introductory course in Financial Markets
Planned learning activities and teaching methods :  
· For each topic (4x): 3h Theory, 3h student presentations (by groups)
· 2 x 2 hours of exercise sessions in the trading room, featuring:
o The appropriation of a financial database platform (Bloomberg)
o The resolution of a virtual case study (Interest-rate risk management)
Mode of delivery (face-to-face ; distance-learning) :  
9 hours of ex-cathedra lectures
12 hours of students' presentations (by teams) and group discussion 2 x 2 hours of exercise sessions
conferences with senior finance executives
Recommended or required readings :  
PowerPoint presentations (available on university's website).
While building mainly on
- Mishkin, F. "The Economics of Money, Banking and Financial Markets" (Pearson Educ., Global edition, 10th Edition, 2013)
- Fabozzi, F., Neave, E. H. and Zhou, G. "Financial Economics" (Wiley, 2012)
Assessment methods and criteria :  
- Oral exam (50% of the final mark)
- Collective work (50% of the final mark) Exercises on interest-rate risk management Assignments (analysis of academic papers, essay)
Relative weighting of individual assessment : 50%
Work placement(s) :  
Organizational remarks :  
Contacts :  
Georges Hübner
N1, Office 111
g.hubner@ulg.ac.be
04/2327428
Teaching Assistant:
Thomas Bonesire
N1, Office 111
thomas.bonesire@ulg.ac.be
04/2327428



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