Finance 614: Subject and Structure Galina A Schwartz Department of Finance Business School University of Michigan

We are going to study n International Financial Markets: n Current Institutions: Offshore and Onshore Markets n Financial Innovation n Financial Instruments [Derivative securities] Futures, Options, Swaps n International Asset Portfolio: Bond and Equity Portfolios

Game Theoretic Approach: [Same as FIN 612]: n Players (Governments, Regulators, Central Banks, Financial Institutions, Corporations, Individuals) n Incentives and Implementation n Important issues [Same as FIN 612]: technology, legal and regulatory framework, market micro structure, macroeconomic parameters +INFORMATION

What will be different from Finance 612 n Finance 614 is more ADVANCED, and it is more DEMANDING n Economic analysis will be more COMPLEX n Number of topics to be covered will be SMALLER

Specifically, the publications we will use are: n The Economist Magazine n Red Herring Magazine n These publications have more details [and more controversies]

Main skill to master [Same as in 612] n Financial Information Analysis n It is: a difficult, challenging and slow to learn skill n It is: a rigorous approach n It is: frustrating at first n Then, it is rewarding

Fin 614 focuses on: n I. Financial institutions and instruments (+ history) Why do they exist What role do they play n II. Expectations of further developments Hi-Tech and Financial System (past, present, future) n III. International Financial Legalities and their future

Finance 614: International Financial System and Hi-Tech: n Information: its costs, its precision, its retrieval and analysis n Globalization: the `new’ markets and their structures n Innovation: financial transactions, clearing house system, n Security: PC, internet, smart cards, etc -- on your demand

Example : n Long Term Capital Management Insider and Outsider Perspective: Which is more informative? Please, read both AEA papers distributed in class today