ULMS Electronic Module Catalogue

The information contained in this module specification was correct at the time of publication but may be subject to change, either during the session because of unforeseen circumstances, or following review of the module at the end of the session. Queries about the module should be directed to the member of staff with responsibility for the module.
Title FINANCIAL CRISES AND DEFAULTS
Code ACFI319
Coordinator Professor KC Milas
Finance and Accounting
Costas.Milas@liverpool.ac.uk
Year CATS Level Semester CATS Value
Session 2021-22 Level 6 FHEQ First Semester 15

Pre-requisites before taking this module (other modules and/or general educational/academic requirements):

ECON223 MACROECONOMICS I 

Modules for which this module is a pre-requisite:

 

Programme(s) (including Year of Study) to which this module is available on a required basis:

 

Programme(s) (including Year of Study) to which this module is available on an optional basis:

 

Teaching Schedule

  Lectures Seminars Tutorials Lab Practicals Fieldwork Placement Other TOTAL
Study Hours 12

6

      12

6

36
Timetable (if known)   60 mins X 1 totaling 6
 
      120 mins X 1 totaling 24
60 mins X 1 totaling 6
 
 
Private Study 114
TOTAL HOURS 150

Assessment

EXAM Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
Assessment 2: Mid-Term Type: Examination Duration: 24 hours (recommended completion time 1 hour) Weighting: 20% Reassessment opportunity: No Penalty for Late Submission: Standard UoL pen  24 hours (recommende    20       
Assessment 1: Examination Type: Written Unseen Exam Duration: 72 hours (expectation that it will be completed in 2 hours) Weighting: 80% Reassessment Opportunity: Yes Penalty for Late Su  72 hours (expectatio    80       
CONTINUOUS Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
             

Aims

This module aims to provide students with a fundamental understanding of the core theoretical and empirical aspects involved in financial crises and defaults. In particular, the aims are that students will be able to:
1. Become familiar with a range of mathematical techniques commonly employed in finance with particular emphasis on sovereign debt valuation .
2. Develop an understanding of the main factors behind financial crises and sovereign defaults.
3. Become familiar with a range of econometric techniques and models commonly used in order to assess whether asset prices become mispriced (that is, overvalued or undervalued) prior, during and after financial crises.
4. Become aware that all econometric models, which are dependent on a set of underlying assumptions such as a linear versus a non-linear specification or the conditioning information set (in terms of defining the so-called ‘control’ variables), have limitations in the se nse that the answer to a particular problem might change once the underlying assumptions change.


Learning Outcomes

(LO1) Students will be able to understand the principles of sovereign debt evaluation.

(LO2) Students will be able to understand how credit-rating agencies assign credit-rating scores to sovereign bonds.

(LO3) Students will be able to develop a deep understanding of economic and financial factors that trigger financial crises and sovereign defaults.

(LO4) Students will be able to develop the ability to analyse and evaluate economic data in order to empirically assess (using econometric software EVIEWS) whether excessive debt levels impact negatively on economic growth.

(LO5) Students will be able to develop the ability to analyse and evaluate economic and financial data in order to empirically assess (using the econometric software EVIEWS) whether asset prices are mispriced prior, during and after financial crises.

(S1) Problem Solving Skills

(S2) Numeracy

(S3) Commercial Awareness

(S4) Communication Skills


Teaching and Learning Strategies

Teaching Method: Online Asynchronous Learning Materials
Unscheduled Directed Student Hours: 12
Attendance Recorded: No

Teaching Method: Synchronous Lecture
Scheduled Directed Student Hours: 12
Attendance Recorded: No

Teaching Method: Seminar
Scheduled Directed Student Hours: 6
Attendance Recorded: Yes

Teaching Method: Group Study
Description: Biweekly 1 hour session to foster student community and engagement by working with others on their ‘active learning’ activities
Scheduled Student Hours: 6
Attendance Recorded: No

Self-Directed Learning Hours: 114
Description: Students are expected to go through: a) the teaching material and exercises provided by the powerpoint slides and b) the relevant reading list

Skills/Other Attributes Mapping

Skills / attributes: Problem solving skills
How this is developed: Start with the problem in hand and use mathematical models to provide an empirical an swer. Lecture examples and exercises will address this.
Mode of assessment (if applicable): Examination and Mid-term test.

Skills / attributes: Numeracy
How this is developed: Use econometric models to provide an empirical answer to the problem in hand. Lecture examples and exercises (based on the econometric software EVIEWS) will address this.
Mode of assessment (if applicable): Examination and Mid-term test.

Skills / attributes: Commercial awareness
How this is developed: Rely on the empirical answer of a given problem to explain what this means for a particular country or the global economy in today's complex and rapidly changing financial environment. Detailed discussion of lecture examples will help students achieve commercial awareness.
Mode of assessment (if applicable): Examination and Mid-term test.

Skills / attributes: Communication skills
How this is developed: Through detailed interpretation of empirical results. Lecture exa mples will address this.
Mode of assessment (if applicable): Examination and Mid-term test


Syllabus

 

The vision thing: Why did no one see the financial crisis coming?
Back to the basics: Stock and debt valuation. The term structure of interest rates. Credit rating agencies. Debt, economic growth and credit rating decisions. How credit rating agencies assign credit rating scores. Empirical models of credit ratings. Credit ratings and Brexit.
the years prior to the financial crisis with emphasis on the UK economy: Bank of England’s monetary independence and Gordon Brown’s “no return to boom and bust”.
The 2007-2009 financial crisis.
Response to the 2007-2009 financial crisis. Fiscal stimulus. Quantitative Easing policies. Forward guidance. Negative interest rates.
The Eurozone crisis.
Social media and financial markets in today’s world. How Twitter affects stock prices. The impact of #Grexit tweets on the Eurozone bond market.
Brexit issues.


Recommended Texts

Reading lists are managed at readinglists.liverpool.ac.uk. Click here to access the reading lists for this module.