Course topics:

• From the effective market hypothesis to the theory of complex systems, divergence between fundamental and market value, statistic based approaches: CAPM, APT
• Risk management in the 20th century, financial innovations, institutions of supervision and surveillance (PSZÁF, SEC, IMF)
• Modelling of cross correlations and extraordinary market events
• Impact of human factor on capital market - financial behaviourism, MiFID and Hungarian banking system
• Market bubbles since 1970s
• Anomalies on bond and currency markets
• Anomalies on stock and resource markets
• Fundamental analysis
• Technical analysis
• The role of pension funds - new pension orthodoxy, ageing and imbalances
• Lessons of subprime crisis

Aims:

The aim of this course is to provide students essential knowledge about the behaviour of capital markets under extraordinary circumstances. Students will be able to understand that the temporary failure of market efficiency leads to major mistakes in the financial innovations, as well as to biases risk management.

Bonanno, G. – Lillo, F. – Mantegna, R. (2001): Levels of complexity in financial markets. Physica A, 299, pp. 16-27.

Dunbar, N. (2001): Inventing Money: The Story of Long-term Capital Management and the Legends Behind it. John Wiley and Sons ISBN: 0471498114

Albeverio, S. – Jentsch, V. – Kantz, H. (2006): Extreme Events in Nature and Society. Springer

Barabási A-L. – Albert, R. (1999): Emergence of Scaling in Random Networks. Science, 286, 509

Watts, D. J. – Strogatz, S. H. (1998): Collective dynamics of 'small-world' networks. Nature, pp. 393, 440.

Christoffersen, P. F. (2012): Elements of Financial Risk Management, Second Edition, Academic Press, pp. 153-171.

Newman, M. E. J. (2005): Power laws, Pareto distributions and Zipf's law. Contemporary Physics 46, 5, pp. 323–351.

Kovács Gy. (2009): Financial Stability and the Banking System, or the Imbalance of the Intermediary System. Public Finance Quarterly, 54, 1, pp. 49-67

Kasch-Haroutounian, M. – Price, S. (2001): Volatility in the transition markets of Central Europe. Applied Financial Economics, 11, pp. 93-105

Heathcote, J. – Perri, F. (2004): Financial globalization and real regionalization. Journal of Financial Theory, 119, pp. 207-243