Mr O. Henry. 316-313 Microeconomics or equivalent. Second semester Three hours a week of seminars. On completion of this subject students should be able to:

• understand the main theories used in the study of financial economics;
• judge the usefulness and the limitations of advanced theory in the area of financial economics;
• critically evaluate contemporary policy debates in the area of financial economics with reference to advanced economic theory;
• extend their knowledge of financial economics via independent study and by taking advanced subjects in this area.

The economics of financial markets and financial institutions, including a substantial component of financial economic theory and some important current issues in the management of financial institutions and the evolution of financial markets. Topics include the theory of choice under certainty and uncertainty, financial theory of the firm, asset pricing models, efficient markets theory, theory of financial intermediation, risk management in financial institutions and capital adequacy and prudential supervision of banks. A 3-hour examination (80 per cent) and class assignments totalling approximately 2,000 words (20 per cent). To be advised