The course begins with an outline of the role of a financial system in an economy. We then pass to the study of financial assets. Bond finance is treated in detail, as is the determination of interest rates in bond markets. We continue with analysis of the importance of imperfect information between parties in credit relationships, and discuss the adverse selection and moral hazard problems. We then touch upon the issue of transmission mechanism of monetary policy. Banks are the subject of more detailed analysis, including bank runs and bank regulation. We finish by studying financial liberalisation and the factors that led to the financial crisis of 2008-2010.

A 2-hour lecture each week for 10 weeks.

A 2-hour revision lecture.

Reassessments are normally available for all courses, except those which contribute to the Honours classification. For non Honours courses, students are offered reassessment in all or any of the components of assessment if the satisfactory (threshold) grade for the overall course is not achieved at the first attempt. This is normally grade D3 for undergraduate students and grade C3 for postgraduate students. Exceptionally it may not be possible to offer reassessment of some coursework items, in which case the mark achieved at the first attempt will be counted towards the final course grade. Any such exceptions for this course are described below. 

Normally, the group-based assessment listed above cannot be reassessed.

The main aims of the course are to:

■ outline the role of a financial system;

■ discuss the financial approach for asset valuation;

■ analyse the functioning of bond markets and how they interact with different parts of the economy;

■ examine the importance of imperfect information between parties in credit

■ relationships, and discuss the problems of adverse selection and moral hazard;

■ analyse the functioning of banks, understand their financial statements and risk management problems, and

■ discuss the various issues of financial market regulation, and the importance of bank health.

At the end of the course, students will be able to:

1. Demonstrate an understanding of why financial institutions exist and what role financial system plays in an economy

2. Use core concepts in banking to assess the role of financial management and risk management in bank management

3. Understand how bank-based and marked-based systems differ from each other

4. Critically assess the factors leading to financial crises with a focus on bank failures and banking crises

5. Discuss the rationale for central banks and regulatory financial institutions and their objectives and functions

Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.