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Financial Contracts - Structure
Financial Contracts - Structure


PAOLO GARELLA , responsible for the course

Degree in ECONOMICS AND FINANCE (MEF) - Classe LM-16 Enrolled from 2014/2015 academic year - Laurea Magistrale - FINANCIAL ECONOMICS - 2016/2017

Compulsory course or activityyes
Year of course2s
Term or semester2nd term
Scientific fields (settori scientifico-disciplinari)
  • SECS-P/01 - Economia politica
ECTS credits (CFU) compulsory6
ECTS credits - facultative-

General information

Aims and objectives: The course is an introduction to Contract Theory with applications to Corporate Finance. The first part provides the essential analytical tools for analysis of contracts: Principal-Agent theory, Adverse Selection. Moral Hazard. The second part dwells on some applications to debt contracts and lender-borrower relationships, and to contracts in corporate finance.

Language of instruction: English

Teaching methods: Lectures




Syllabus: Part 1 (about 20 hours) is devoted to the theoretical underpinnings of contract theory: risk sharing through contracts, principal.agent relationships, adverse selection. The second part (about 20 hours) is devoted to applications to financial economics: residual claimancy and risk, shareholders-management relationship, debt under asymmetric information, corporate debt restructuring, auctions.

Syllabus - non-attending students: Lo stesso che per gli studenti frequentanti.

Short course description english flag

The course provides an introduction to contract theory, agency theory, and asymmetric information economics, with applications to corporate finance.

Readings: The student shall be referred to texts and journal articles that shall be given at the start of the course. The basic references books for the topics covered are found in the following books available at the Faculty Library:

1. Salanié B.: The Economics of Contracts, MIT Press, 2005.
2. Perez-Castrillo D. and Macho-Stadler I.: An Introduction to the Economics of Information: Incentives and Contracts, Oxford, 2001
3. Bolton P. and Dewatripont P., Contract Theory, MIT Press 2005
4. Tirole, J. The Theory of Corporate Finance, Princeton University Press, 2005.
5. Brealy R.A., Myers S.C., and Allen F., Principles of Corporate Finance: Global Edition, McGraw Hill Education, 2013

Readings - non-attending students: Lo stesso che per i frequentanti.

Prerequisites, exams and assessment

Type of assessmentEsame
Assessmentvoto verbalizzato in trentesimi

Prerequisites, exams and assessment Prerequisites: knowledge of Microeconomics and basic Game Theory.
Exam: a written exam at the end of the course.

Prerequisites, exams and assessment - non attendant students The same as for attending students.

Propaedeutical courses All of the first year courses plus Decision Theory and Behavioral Economics

Structure of the course

Scientific fields

  • SECS-P/01 - Economia politica - Credits: 6

Teachers ' office hours

Teacher's office hours
TeacherOffice location
PAOLO GARELLA , responsible for the courseil Professore è in anno sabatico e il ricevimento è su appuntamentoDEMM stanza 26 - via Conservatorio 7 Milano

Further information

The course is divided int two parts of 20 hours each. Attendance is taken on a lecture-by-lecture basis and counts for the final grade.