Fed policy is addressed with an eye on its effect on short-term interest rates and Fed forecasting with fed funds futures. Foreign money markets are surveyed, and the role of the interbank FX market is investigated. Structured finance in the money markets is addressed, including asset securitization and the asset-backed commercial paper market, including structures, issuers and investors. This course is about risk-how banks measure, manage and price foreign exchange risk, interest rate risk and default risk. The wave of bank failures around the globe in the past two decades, increasing in intensity in the 1990s, suggests deep confusion about risks.
Students trade foreign exchange on a computer-based simulator and solve quantitative problems.
Bank failures in both developed and developing economies are studied systematically and are the subject of a research paper. This course asks why emerging financial markets are different from the financial markets of industrial countries. The course is therefore about the necessary underpinnings of all financial markets. The cycle of enthusiasm over emerging markets in the early 1990s followed by financial crises in the late 1990s is analyzed from this perspective, with particular attention to the problem of banks. B6601 or the instructor's permission.