Models and methods in economics and finance - 86051

The course introduces and analyse some fundamental models to understand the financial markets.

In the first part, paying particular attention to the bond market. In particular, the aim of the course is threefold: (1) to introduce model for the description of interest rate dynamics in the international markets, (2) to explain how to use these models to interpret financial and economic phenomena, and (3) to describe how to build a bond portfolio to face future payments. The student will be able to model interest rate curves, such as BOT and BTP yields, and short-term interest rate forecasts, such as the EURIBOR. This way, she will be able to interpret indispensable dynamics for economical and financial decision makers. For instance, the impact of the spread BTP-Bund variations on state and bank budgets, or the effect of EURIBOR fluctuations on a floating-rate mortgage. Moreover, the student will be able to analyse the risk/reward profile of bond instruments to build immunized portfolios which represent the main investment structure for financial institutions, both banks and insurance companies.

In the second part, the course introduces and analyses the fundamental models for the understanding of stock markets. In particular, the course presents the main models to evaluate stocks and their risk, and the most important approaches to build stock investment portfolios.

The student will be able to analyse the risk/reward profile of stock instruments quoted in the financial markets using the most modern techniques adopted in international financial institutes. This way, she will be able to build stock portfolios to reach specific performance targets controlling the portfolio risk.