Graduate Center Masterclasses

Course Objective

Upon successful completion of this course, students will be able to:

• Understand the main concepts and empirical methods behind conducting stress tests that are key for diagnosing systematic risk and financial stability exposure.
• Translate discrete-time models into their continuous-time counterparts through the use of simple continuous-time stochastic calculus
• Use and develop numerical techniques of dynamic optimization (Matlab) for solving continuous-time models for addressing Economics/Finance questions.
• Work independently in order to expand the research frontier of modern financial stability toward new research questions in economics and finance.
• Develop novel thinking about the interplay between financial intermediaries and the real economy, through using micro-founded models of asset pricing that allow for crisis/misallocation pricing.
• Develop new policy-evaluation tools.

Outline

Lecture 1 – Outline of stress-test concepts and empirical methods of financial stability. Revision of stochastic calculus (Brownian motions, Poisson processes, Hamilton-Jacobi-Bellman equations), and introduction to bankruptcy models.

Lecture 2 – Understanding credit-cycle and inside-money models of financial intermediation in discrete and continuous-time. Further empirical tests and empirical literature, motivated by these theoretical models.

Lecture 3 – Numerically solving continuous-time credit-cycle and inside-money models with endogenous growth. Related empirical tests and questions.

Registration

If you want to join this masterclass, please register with the Graduate Center on a first-come, first-served basis: gradcenter@diw.de