Finansal Sistemler ve Kaos (G371) | GSÜ

Content

Objective

This course aims to examine financial systems not merely as linear structures tending towards equilibrium, but as systems that exhibit nonlinear and complex dynamics arising from feedback mechanisms, expectations, leverage, liquidity, and network interconnections. It seeks to equip students with the ability to assess financial fluctuations, crises, contagion processes, and policy interventions using chaos theory, complexity economics, and systemic risk approaches. The course also aims to develop an understanding of the conditions under which small changes can generate large market movements and how behaviour that appears rational at the individual level can produce instability at the systemic level.

Course Content

The course begins with the fundamental components and functioning of financial systems before examining linear and nonlinear dynamics, the core concepts of chaos theory, sensitivity to initial conditions, feedback mechanisms, bifurcations, attractors, and irregularities in financial time series.

Financial markets are examined as complex adaptive systems, with particular attention to expectations, herding behaviour, speculative bubbles, leverage cycles, liquidity spirals, bank runs, runs on investment funds, shadow banking, financial networks, and mechanisms of systemic contagion.

The responses of central banks, regulatory institutions, and other public authorities to financial crises are analysed through selected case studies from the global and Turkish economies. The course also examines the capacity of financial stability policies to prevent crises and the unintended consequences of policy interventions.

Course Learning Outcomes

Upon successful completion of the course, students will be able to:

Explain the principal institutions and markets of the financial system and their interconnections.

Distinguish between linear dynamics and nonlinear and chaotic dynamics.

Apply concepts from chaos theory, including sensitivity to initial conditions, feedback, bifurcations, and attractors, to financial phenomena.

Analyse how leverage, liquidity, expectations, and herding behaviour amplify financial fluctuations.

Explain the mechanisms underlying bank runs, runs on investment funds, asset price bubbles, and liquidity spirals.

Evaluate the effects of network interconnections among financial institutions on systemic risk and contagion.

Discuss whether financial crises arise solely from exogenous shocks or also from the endogenous dynamics of the financial system.

Compare historical and contemporary financial crises through the perspectives of chaos theory, complexity, and systemic risk.

Analyse the short- and long-term consequences of interventions by central banks and regulatory institutions.

Develop alternative policy proposals to promote financial stability and assess their potential unintended effects.

Teaching and Learning Methods

The course will combine theoretical lectures, guided classroom discussions, case studies, visual modelling, introductory data analysis exercises, and student presentations. Students will also learn to use advanced statistical and mathematical software and apply it in coursework.

Global financial crises and recent developments in Turkish financial markets will be analysed to illustrate theoretical concepts. Students will be expected to prepare short studies examining the emergence and propagation of a selected financial crisis, together with the policy interventions implemented in response.

Simple simulations and financial network visualisations will demonstrate the effects of leverage, liquidity, and feedback mechanisms on the financial system. The course will also incorporate problem-based learning, critical reviews of academic articles, group work, and scenario analysis.

References

Hamilton, J. D. (1994). Time Series Analysis. Princeton University Press.
Hayashi, F. (2000). Econometrics. Princeton University Press.
Kantz, H., & Schreiber, T. (2004). Nonlinear Time Series Analysis (2nd ed.). Cambridge University Press.
Lütkepohl, H. (2005). New Introduction to Multiple Time Series Analysis. Springer.
R , Eviews, Stata

Weekly Contents

Theory Topics
Week	Weekly Contents
1	System theory introduction
2	Financial systems
3	Financial systems
4	Decision making and rationality
5	error term and its distribution
6	Efficient markets hypothesis
7	Stochastic financial value function
8	Linear stochastic systems
9	Stability, balance and stability
10	Stability tests
11	AR(p), MA(q), ARMA(p,q)
12	Nonlinear stochastic systems
13	Nonlinear stochastic systems
14	BDS test

Practice Topics
Week	Weekly Contents
1	System theory introduction
2	Financial systems
3	Financial systems
4	Decision making and rationality
5	error term and its distribution
6	Efficient markets hypothesis
7	Stochastic financial value function
8	Linear stochastic systems
9	Stability, balance and stability
10	Stability tests
11	AR(p), MA(q), ARMA(p,q)
12	Nonlinear stochastic systems
13	Nonlinear stochastic systems
14	BDS test

Assessment System

Contribution to Overall Grade
Activities	Number	Contribution
Contribution of in-term studies to overall grade	5	35
Contribution of final exam to overall grade	1	65
Total	6	100

In-Term Studies
Activities	Number	Contribution
Assignments	2	20
Presentation	1	45
Midterm Examinations (including preparation)	1	35
Project	0	0
Laboratory	0	0
Other Applications	2	0
Quiz	0	0
Term Paper/ Project	0	0
Portfolio Study	0	0
Reports	0	0
Learning Diary	0	0
Thesis/ Project	0	0
Seminar	0	0
Other	0	0
Make-up	0	0
Total	6	100

Relation of Proficiency

No	Program Learning Outcomes	Contribution
No	Program Learning Outcomes	1	2	3	4	5
1	The acquisition of high-level knowledge of the functions of production management and marketing, management, accounting and finance; the skill of using this knowledge.				X
2	The acquisition of basic conceptual knowledge about scientific fields related to professional life, such as law, economics, sociology, psychology, social psychology and quantitative methods.					X
3	The ability to work effectively in a team; the ability to pass on knowledge to other members of the team.	X
4	The competence to use his/her knowledge on the field, to analyze and interpret the data obtained, to identify the problems encountered, to provide appropriate solutions and scientifically defend these solution suggestions when necessary.				X
5	The competence to determine the aims and objectives of the company or institution in which he/she is employed by taking into account the needs, the competitive dynamics of the market and by calculating the risks incurred; the ability to engage in entrepreneurship and establish and manage a business.				X
6	Awareness of constantly updating his/her professional knowledge and skills; the ability to adapt to change and innovation; the competence to evaluate critically the information he/she has acquired.					X
7	Basic knowledge of information and communication technologies required for professional life; the ability to use core office programs at an advanced level; expertise in data processing and report writing in the IT environment.					X
8	Ability to follow current information in his/her field in both English and French and to communicate in writing and verbally with stakeholders in both languages.			X
9	The ability to conduct researches and studies taking into account the market, dynamics of competition, organizational and global factors and scientific methods; contribute to projects, take responsibility in projects, display competence to make innovative and effective decisions.				X
10	Ability to develop strategies, find creative solutions to management problems by building relations with other areas of the social sciences and take the responsibility of these decisions.				X
11	Consciousness of taking into account ethical values, when making decisions and being involved in business life.				X
12	Awareness of the impact of practices related to his/her field on the global and social dimensions (universality of social rights, social justice, cultural values, environmental problems, sustainability, etc.) and their legal consequences.				X