Courses

Climate change presents one of the central challenges of our generation, with a wide range of effects on financial markets and the broader economy. At the same time, financial markets play an important role in financing the transition to a net-zero economy. In this class, we study the interaction between climate change and firms, financial markets, energy markets, and regulators/policy makers.

Climate change is one of the most critical issues facing the planet and will require massive flows of capital. Finance will be instrumental in facilitating the transition to lower-carbon economies. Business schools need to be able to train the next generation of finance professionals. To do this, we will need far more professors trained to teach climate finance. Financial Economics of Climate and Sustainability (FECS) seeks to be an important, timely, and catalytic development in the climate finance space designed to develop the next generation of scholars and educators in this field and to create a community of researchers in this field.

This PhD course presents research topics in the growing area of household finance. Each week, we will read a number of papers in one research area within household finance. Most of the papers will be empirical, and in most weeks our discussions will highlight how the papers use various empirical strategies (instrumental variables, differences-in-differences, regression discontinuity, structural estimation, and field experiments) to identify causal effects. The topics are chosen to give students a taste of the types of research done under the 'household finance' umbrella, rather than to provide a comprehensive overview of household finance research. The papers on the reading list include both seminal and current research papers in the area.

The course is a rigorous, quantitative introduction to financial market structure and financial asset valuation. The main topics of the course are arbitrage, portfolio selection, equilibrium asset pricing (CAPM), fixed income securities and derivative pricing. There is a small section on project valuation. You are expected to understand valuation formulas and be able to apply them to new problems. The appropriate tools necessary for solving these problems will be developed at each stage and practiced in the homework assignments. The models we will cover have immediate applications and implications for real-world financial decisions. Every effort will be made to relate the course material to current financial news.

Housing contributes over 16% to U.S. GDP and is the largest asset on the household sector's balance sheet, while the mortgage market constitutes the second largest U.S. credit market, just behind Treasuries and well ahead of corporate debt. In this course we study the economic forces driving housing and mortgage markets, and their interactions with the wider macro economy. We begin by developing an equilibrium model of the housing, rental and construction sector. In the process we discuss the drivers of demand for housing services such as economic conditions and demographics, as well as the forces determining the valuation of housing assets, such as the tax treatment of mortgage interest. We use this model to analyze a number of theories of the recent boom-bust episode, perform valuation analysis on regional housing markets and discuss the short-run and long-run effects of possible changes to government policy. We then discuss the drivers of house prices at a more local level, analyzing the role of location, house characteristics and local amenities, as well as considering the role of information frictions in real estate markets. In the process, students will get an opportunity to perform a number of empirical valuation analyses using real-world data. We then move onto understanding the economics of mortgage markets. We begin by considering the risks inherent in mortgage lending, focusing on default and prepayment risk. We discuss the theory and evidence behind different explanations for mortgage default (strategic default versus liquidity defaults), and analyze recent policy proposals to reduce foreclosures. We also learn about the important differences in the valuation of fixedrate and adjustable-rate mortgages. We next introduce secondary mortgage market, and learn about the structure of mortgage-backed securities and the role of the government through Fannie Mae, Freddie Mac and Ginnie Mae. In the process, we discuss the advantages and disadvantages of securitization. Finally we will consider the channels of feedback from the housing markets to the rest of the economy, focusing on household and bank balance sheets, and discuss recent government interventions to deal with the housing crisis, as well as the Federal Reserve's quantitative easing policy. The course involves a group project that encourages students to use the newly-acquired tools to identify real estate related investment opportunities. Throughout the course, wherever relevant, I will tell students about my own research as well as current relevant research of other academics from Booth and the wider profession. This course should be interesting to anybody thinking about buying a house, investing in real estate or working in finance more generally (e.g. global macro hedge funds).