Jiajing Sun

Jiajing Sun

PhD, CFA, FIMA, Member of the London Mathematical Society. Associate Professor and the Deputy Director of the Department of Statistics and Data Science, School of Economics and Management, University of the Chinese Academy of Sciences.

Financial Economics

Postgraduate course, University of Chinese Academy of Sciences, School of Economics and Management, 2015

This course introduces the core theory of modern financial economics and financial management. It covers aspects such as portfolio choice, systems of financial markets, arbitrage, option pricing, credit rationing, deposit contracts, banking, and regulation of banks.

The course is taught in both Chinese and English, with English slides and course materials. As the lead instructor, I provided a comprehensive introduction to financial economics, with a focus on both theory and practical applications in real-world financial systems.

Course Content:

  1. Decision Making Under Uncertainty:
    • Difference between certainty and uncertainty.
    • Decision making under uncertainty and expected utility.
    • Stochastic dominance and attitudes towards risk.
    • Mean-variance analysis as a special case of expected utility.
  2. Portfolio Choice:
    • Mean-variance approach and capital asset pricing.
  3. Systems of Financial Markets:
    • Spot markets, contingent claims markets, Arrow securities, ordinary securities markets, and incomplete markets.
  4. Arbitrage and Option Pricing:
    • Arbitrage and option pricing.
  5. Firms and Financial Markets:
    • Firm and stock market equilibrium.
    • Separation of ownership and control.
    • Financial structure of the firm.
  6. Debt Contracts and Credit Rationing:
    • Adverse selection in insurance markets.
    • Standard debt contracts and credit rationing.
  7. Deposit Contracts and Banking:
    • Money as a means of payment.
    • Liquid and illiquid assets.
    • The optimal contract.
    • Banks as deposit-taking institutions and the issue of bank runs.
  8. Regulation of Banks:
    • Bank regulations and their rationale.
    • Reserve requirements, suspension of convertibility, and deposit insurance.
    • Capital adequacy requirements.
  9. Towards Application:
    • Financial markets and financial intermediaries in theoretical and evolutionary context.

Teaching Methodology:

The course emphasizes theoretical understanding as well as practical skills for financial data analysis, particularly using econometric models. We applied the discussed theories to real-world financial problems using quantitative tools.

Hours: 40 hours

Recommended Textbook:

  • Jürgen Eichberger and Ian R. Harper. Financial Economics, Oxford University Press.