| CODE | ISR1001 | ||||||||||||
| TITLE | Economics of Risk Management | ||||||||||||
| UM LEVEL | 01 - Year 1 in Modular Undergraduate Course | ||||||||||||
| MQF LEVEL | 5 | ||||||||||||
| ECTS CREDITS | 4 | ||||||||||||
| DEPARTMENT | Insurance and Risk Management | ||||||||||||
| DESCRIPTION | This study-unit will provide a comprehensive look at how mainstream economics deals with issues related to risk management and how these insights can be applied in various settings within insurance and financial markets. The primary focus will be on individual decision-making processes and the allocation of scarce resources under risky situations, and in turn how risk can influence the operations of firms and entire markets. The unit will combine both a theoretical approach based on several key economic models developed over recent years, as well as numerous applied examples and empirical data in order to assist students in their overall understanding of the subject matter. The unit will start off with an introduction to the basic economic concept of market equilibrium, with specific focus on financial markets. The unit will then move on to the fundamental theory of choice under uncertainty in economics, namely the expected utility hypothesis, followed by a look at how economists measure people's attitudes towards risk. Other topics will include the development of a simple model of risk management and demand for insurance, macroeconomic issues and policies related to risk management at the industry and country level, as well as a look at the 2008 financial crisis and subsequent credit crunch. Although some basic mathematics will be used to formalise the exposition, the focus will remain firmly on the underlying intuition and economic reasoning behind the concepts presented (all mathematical tools used as part of this module will be reviewed in class). Study-Unit Aims: - To provide a wider perspective on risk management issues by introducing a number of salient theories from economic thought; - To demonstrate how economics can be used to explain behaviour under risk and uncertainty, and in turn how these decisions affect the operation of financial and insurance markets; - To show how risk management can influence macroeconomic outcomes and policies around the world. Learning Outcomes: 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: - analyse various issues related to risk management using the tools and tenets of neoclassical economics; - develop economic models of decision-making under risk and analyse the implications of such behaviour for the market for insurance; - appreciate the importance of risk management for wider economic outcomes and policies, and improve their understanding of the 2008 global financial crisis. 2. Skills: By the end of the study-unit the student will be able to: - strengthen their analytical skills using the tools and tenets of neoclassical economics to analyse the various issues related to risk management; - develop economic models of decision-making under risk and analyse the implications of such behaviour for the market for insurance; - grasp and appreciate the importance of risk management for wider economic outcomes and policies, and improve their understanding of the 2008 global financial crisis. Main Text/s and any supplementary readings: Main Texts: - Varian, H. Intermediate Microeconomics: A Modern Approach, 9th Edition (W.W. Norton, 2014). - Blanchard, O., Amighini, A., Giavazzi, F. Macroeconomics: A European Perspective, 2nd Edition (Pearson, 2013). |
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| STUDY-UNIT TYPE | Lecture and Tutorial | ||||||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Tyrone Mizzi |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2025/6. It may be subject to change in subsequent years. |
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