Financial Economics

- Introduction -

Antoine Bommier

ETH Zurich

Spring Semester 2018

Financial Economics - Introduction - 1/7

 General information

Lecture every Tuesday, 15-17.

Your professor: Antoine Bommier, Chair of Integrative Risk
Management and Economics (www.irme.ethz.ch;
abommier@ethz.ch).
Helene Schernberg (Ph.D. student at the IRME chair)
provides specific support for this course.
Office hours: afternoons 14-18. Please send an e-mail with
written questions beforehand.
hschernberg@ethz.ch

Financial Economics - Introduction - 2/7

 Objectives of the course

A course at the intersection of Micro-Economics and Finance.

A short introduction to finance and investment planning.
The core of the course explains what micro-economic theory
tells us about market equilibrium, risk sharing and assets
prices.
A rather theoretical course. Useful to get intuition on what
determines the price of risky assets, what is optimal risk
sharing, where the market may fail to reach Pareto optimal
situations.
Not a practical formation for traders.
No deep exploration of ”market irrationality”, financial
(in)stability, systemic risk, debt crisis, etc. This is still an
introductory course.

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 Plan of the course

1 An introduction to financial assets.

2 Option valuation.
3 An introduction to the economic analysis of asset markets.
4 A simplified approach to asset markets.
5 Choice under uncertainty.
6 Demand for risk.
7 Asset prices in a simplified context: Mean variance analysis.
8 Risk sharing and insurance.
9 Risk sharing and asset prices in a market equilibrium.

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 Suggested readings:

Investments, by Z. Bodie, A. Kane and A. Marcus, for the

introductory part of the course (see chapters 20 and 21 in
particular).
Finance and the Economics of Uncertainty by G. Demange
and G. Laroque, for the main part of the course.

Other readings:

The Economics of Risk and Time, by C. Gollier

Intermediate Financial Theory by J.-P. Danthine and J.B.
Donaldson.

Financial Economics - Introduction - 5/7

 Evaluation - Training

Evaluation: Written exam during last class (May, 29) - 90

minutes. No documents/computers allowed.

Training
Exercises provided at the end of each set of slides. Solutions
on myStudies.
Homework. Distributed on April 24. Due on May 8. Graded
for your information. Not mandatory but highly recommended.

Financial Economics - Introduction - 6/7

 Some other relevant courses by D-MTEC:

Risk and Insurance Economics (W. Mimra)

Decisions and Markets (A. Bommier)
Industrial Organization and Competition Policy (J.-P. Nicolai)
Risk Case Study Challenge (B. Bergmann, A. Bommier, S.
Feuerrigel)
Financial Market Risks (D. Sornette), in Fall
The Economics of Climate Change (D. Aubert, A.
Goussebaile, starting from Fall 2018)
Risk Center Seminar Series

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