Bank of Russia’s experts took an ICEF-hosted course in Financial Economics

ICEF alumni often return to their alma mater as accomplished professionals to hold master classes and evaluate master theses. Many of them serve also as initiators of partnership relations between their employers and ICEF. Maria Pomelnikova, formerly a master’s student of ICEF and currently an assistant director at the Macroeconomic and Financial Studies Unit of the Bank of Russia’s Research and Forecasting Department, came up with an initiative to organize at ICEF a series of Economics lectures for her colleagues at the Central Bank.

Among the economists at the Bank of Russia, the interest was sparked by Financial Economics lectures by visiting professor Dimitrios Tsomocos, Professor of Financial Economics at Saїd Business School, University of Oxford. His audience included, alongside the MSc Financial Economics students, eight experts representing three departments within the Bank of Russia – Research and Forecasting, Financial Stability, and Monetary Policy.

Professor Dimitrios Tsomocos is working towards designing a new paradigm of monetary policy, financial stability analysis and macroprudential regulation. He co-developed the Goodhart – Tsomocos model of financial fragility. More than ten central banks have calibrated and are calibrating the model, including the Bank of Bulgaria, Bank of Colombia, Bank of England, Bank of Jamaica, Bank of Korea, the Central Bank of Chile, and the Bank of Russia.

Dimitrios has been lecturing ICEF students for longer than 10 years. This time he delivered a series of advanced lectures in Financial Economics: Asset Pricing as part of the eponymous course on ICEF MSc curriculum.

Financial Economics is an area that gains more and more relevance among central banks. Following the global financial crisis of 2008, the issues of mutual impact and linkages between financial markets and macroeconomic performance have become highly topical in research efforts and economic policy. Via his lectures, Dimitrios Tsomocos offers the fundamental theoretical knowledge of Financial Economics, spanning Asset Pricing, Investment Portfolio, Liquidity, Yield Curve, among others. By using models, he demonstrates how price formation has evolved as a notion with regard to commodities and financial products, the principles to be observed when shaping portfolios of investments, and how mechanisms can be triggered that lead to imperfections of a market. Noted by the Bank of Russia’s experts as a special highlight of the lectures is the way in which Dimitrios Tsomocos systematizes all Asset Pricing theories into an explicit set of approaches and how he juxtaposes theories, questioning the relevance of some of the premises the current models build on.

The topics that received the most interest from the Bank of Russia related to how monetary policy and banking regulation models work when exposed to credit default risk and collateral constraints. The vehicles toward liquidity models and defaults, as presented by Dimitrios Tsomocos, have a good chance of being applied by the Bank of Russia in its own operational models.