Instruments of financial markets

This course provides an introduction to financial instruments and the analysis of capital markets. The course adopts the view of a central banker, who needs to under-stand financial instruments both in terms of their economic role and their actual use. Particular emphasis is given to financial insti¬tutions’ risk management. The first week of the course reviews fun¬damental concepts in finance and macro¬economics, including asset returns, market efficiency, portfolio theory, the CAPM, monetary policy and financial markets, foreign-exchange-markets, as well as financial crises. The second week starts with an introduc¬tion to the pricing of financial assets and proceeds to illustrate various bond charac¬teristics in the context of three case studies: the Greek debt exchange (bond yields and haircuts), Kentish Town Capital (convexity and arbitrage), and Banc One (duration and immunization).