About this Course
4.8
6 ratings
4 reviews
Specialization
100% online

100% online

Start instantly and learn at your own schedule.
Flexible deadlines

Flexible deadlines

Reset deadlines in accordance to your schedule.
Intermediate Level

Intermediate Level

Hours to complete

Approx. 25 hours to complete

Suggested: 5 hours/week...
Available languages

English

Subtitles: English...
Specialization
100% online

100% online

Start instantly and learn at your own schedule.
Flexible deadlines

Flexible deadlines

Reset deadlines in accordance to your schedule.
Intermediate Level

Intermediate Level

Hours to complete

Approx. 25 hours to complete

Suggested: 5 hours/week...
Available languages

English

Subtitles: English...

Syllabus - What you will learn from this course

Week
1
Hours to complete
4 hours to complete

Perfect Capital Markets. Problems Caused by Private Information

In Week 1 we propose the set of assumptions and the framework of our discussion. We will discuss perfect capital markets and see how the deviations from this idealized model that are observed in our real life result in the demand for financial intermediation and for the services of financial institutions. We will discuss the fundamental problems caused by the existence of private information (moral hazard и adverse selection) and the damage they lead to. Based on the most simplistic models you will be able do delve deeper into the core of these problems and to evaluate their potential scale. You will learn what role the moral hazard plays in insurance, and how the adverse selection and moral hazard problems reduce the efficiency of lending....
Reading
12 videos (Total 104 min), 6 readings, 2 quizzes
Video12 videos
1.1. Introduction – perfect capital markets5m
1.2. Demand for the financial intermediation6m
1.3. Model of private information – key assumptions6m
1.4. Model of moral hazard14m
1.5. Co-insurance as a market solution to the moral hazard problem4m
1.6. Moral hazard in insurance (1) – a more advanced model12m
1.7. Moral hazard in insurance (2) – incomplete insurance8m
1.8. Model of adverse selection11m
1.9. Adverse selection in credit markets (1) – expected cash flows to the bank12m
1.10. Adverse selection in credit markets (2) – credit rationing8m
1.11. Moral hazard from increasing interest rates9m
Reading6 readings
Konstantin Kontor10m
AIBEc. The American Institute of Business and Economics10m
Grading10m
Handouts – an important comment10m
1.1. Why do financial institutions exist?10m
1.2. Problems caused by private information10m
Quiz2 practice exercises
1 (Practice)20m
1 - Moral hazard, adverse selection, and the adventures of the greedy monopolist bankm
Week
2
Hours to complete
3 hours to complete

ALLEVIATION OF MORAL HAZARD – DEBT AND EQUITY CONTRACTS. BANKS (1) – DIVERSIFICATION AND MONITORING

In Week 2 we will consider certain ways of overcoming problems caused by private information and evaluate them. We will know why some methods work while others don’t, and why. You will learn the core differences between equity and debt financing, study debts contracts with liquidation and see the core inefficiency of that kind of a debt contract. Based on a simple model you will study diversification and delegated monitoring and see how they contribute to the efficiency of lending. We will find out how a bank emerges as a key financial intermediary responsible for asset monitoring. You will be able to see why the bank can make money and to calculate its profit in different cases. At the end of Week 2 we will pose a fundamental question: How does the bank attract depositors?...
Reading
7 videos (Total 50 min), 2 readings, 2 quizzes
Video7 videos
2.2. Debt contract with liquidation (DCL) as a means of alleviation of moral hazard. The inefficiency of DCL6m
2.3. Monitoring as a universal and efficient way of overcoming unobservability5m
2.4. Multiple lenders (1) – the model8m
2.5. Multiple lenders (2) – bank contracts5m
2.6. Delegated monitoring (1) – the interaction of the parties and bank’s profit12m
2.7. Delegated monitoring (2) – banks’ vulnerability to runs5m
Reading2 readings
2.1. Alleviation of moral hazard – debt and equity contractsm
2.2. Diversification and the feasibility of delegated monitoring10m
Quiz2 practice exercises
2 (Practice)20m
2 - Debt contracts and the anatomy of bank financingm
Week
3
Hours to complete
3 hours to complete

Banks (2) – Asset Transformation and Liquidity Creation. Banks’ Vulnerability with Respect to Runs

Week 3 of the Course is devoted to the analysis of creation of liquidity – namely, we do answer the question of how a bank attracts depositors. You will get introduced to asset transformation and will learn how the presence of banks in capital markets makes the money circulation in the economy more efficient. You will analyze the market participants’ preferences and the “safety cushion” of a bank. We will study the mechanism of bank runs and feel how vulnerable the bank is with respect to runs. You will learn what methods of fighting bank runs have been used in centuries, and realize why the role of government in regulating of the banking business is so important. We will discuss deposit insurance as a universal and effective mechanism of preventing runs....
Reading
8 videos (Total 74 min), 2 readings, 2 quizzes
Video8 videos
3.2. Liquidity creation (1) – the model of liquidity11m
3.3. Liquidity creation (2) – the mechanism10m
3.4. Banks’ vulnerability with respect to runs15m
3.5. Ways to fight bank runs (1) – suspension of convertibility4m
3.6. Ways to fight bank runs (2) – deposit insurance9m
3.7. Problems of deposit insurance12m
3.8. Deposit insurance and the need to regulate6m
Reading2 readings
3.1. Banks – illiquid asset transformation10m
3.2. Banks – creation of liquidity and bank runs10m
Quiz2 practice exercises
3 (Practice)20m
3 - Asset transformation – “black boxes” and “red triangles”m
Week
4
Hours to complete
3 hours to complete

Bank Regulation and Reform. Payment Services. Mobile Banking. Bank 3.0

Week 4 of the Course consists of two parts. The first part is devoted to the discussion of challenges and development of banking regulation. We consider the S&L market crash of the 1980’s as a trigger to the initiation of the worldwide regulatory movement. You will get introduced to the Basel process as the basis of the modern bank regulation. The second part of Week 4 shifts focus somewhat. We will talk about the payment services that are tantamount to banking for the majority of population, at least in the developed world. We will discuss how the fast development of IT technologies, the Internet and the social media influences banking business. But we will see that the most important functions of banking – asset monitoring and liquidity creation – do not disappear but take a new shape. At the very end we will drop a few words about private banking – a very specific area of banking services for high net worth individuals....
Reading
8 videos (Total 78 min), 1 reading, 2 quizzes
Video8 videos
4.2. The S&L crisis of the 1980’s. Zombie S&L’s. The sources and reasons of bank regulation8m
4.3. Bank regulation (1) – nature, goals, and importance13m
4.4. Bank regulation (2) – mechanism. The Basel Accords14m
4.5. Payment services – history, development, and technology5m
4.6. Mobile banking (1) – technology and services. Bank 3.011m
4.7. Mobile banking (2) – loans and monitoring at Bank 3.012m
4.8. Private banking. Mobile banking and traditional banking – from conflict to synergy7m
Reading1 reading
4. Bank regulation and reform – an overview of articles10m
Quiz2 practice exercises
4 (Practice)20m
4 - From the Great Depression to Bank 3.0m
4.8
4 ReviewsChevron Right

Top Reviews

By DHNov 13th 2018

The pace of the course is great, I gladly will recommend this to others foe quality reference.

Instructor

Avatar

Konstantin Kontor

Director and Professor of Finance and Strategy
American Institute of Business and Economics (AIBEc)

About Moscow Institute of Physics and Technology

Московский физико-технический институт (неофициально известный как МФТИ или Физтех) является одним из самых престижных в мире учебных и научно-исследовательских институтов. Он готовит высококвалифицированных специалистов в области теоретической и прикладной физики, прикладной математики, информатики, биотехнологии и смежных дисциплин. Физтех был основан в 1951 году Нобелевской премии лауреатами Петром Капицей, Николаем Семеновым, Львом Ландау и Сергеем Христиановичем. Основой образования в МФТИ является уникальная «система Физтеха»: кропотливое воспитание и отбор самых талантливых абитуриентов, фундаментальное образование высшего класса и раннее вовлечение студентов в реальную научно-исследовательскую работу. Среди выпускников МФТИ есть Нобелевские лауреаты, основатели всемирно известных компаний, известные космонавты, изобретатели, инженеры....

About American Institute of Business and Economics

The American Institute of Business and Economics (AIBEc) offers a wide variety of business courses in finance, accounting, marketing, strategy, HR, business law, economics, general management, business psychology, as well as course projects and the Field study. AIBEc provides for flexibility and customization of programs and schedules....

About the Understanding Modern Finance Specialization

This Specialization is designed for a wide audience of those interested in finance either professionally or just of curiosity, including managers of different levels specializing in finance, accounting, business planning, strategy, consulting, and project management, IT specialists engaged in the area of finance, fin-tech, big data, and valuation, etc. Through four courses and the final Project, you will cover the theory and practice of capital markets and financial institutions, corporate finance and project valuation, financial and managerial accounting as applied to finance, as well as the M&A market as the ultimate judge of financial efficiency and value creation. The Specialization will prepare you to understand and use the applications of financial ideas, concepts, models, strategies, and tools to build a successful career in finance and in business, as well as to take advantage of opportunities offered by financial markets....
Understanding Modern Finance

Frequently Asked Questions

  • Once you enroll for a Certificate, you’ll have access to all videos, quizzes, and programming assignments (if applicable). Peer review assignments can only be submitted and reviewed once your session has begun. If you choose to explore the course without purchasing, you may not be able to access certain assignments.

  • When you enroll in the course, you get access to all of the courses in the Specialization, and you earn a certificate when you complete the work. Your electronic Certificate will be added to your Accomplishments page - from there, you can print your Certificate or add it to your LinkedIn profile. If you only want to read and view the course content, you can audit the course for free.

More questions? Visit the Learner Help Center.