1. Introduction Stock market is a slough of fear and greed untethered to corporate realities – Warren Buffet

2. NES FF 2005/06 2 Plan for today What is finance? What is finance? Typical financial problems / myths Typical financial problems / myths Financial institutions Financial institutions –Markets / instruments / intermediaries Asset pricing / project evaluation Asset pricing / project evaluation –Time vs risk dimension Further topics / courses Further topics / courses –Corporate finance –Econometrics of financial markets –Risk management

3. NES FF 2005/06 3 What is finance? Real vs financial investments Real vs financial investments Management of risks Management of risks –Intertemporal vs cross-sectional Asset pricing Asset pricing Portfolio management Portfolio management Performance evaluation Performance evaluation Financial engineering Financial engineering

4. NES FF 2005/06 4 Typical issues / myths Mutual fund X has the highest annual return. Does X have the best portfolio manager? Mutual fund X has the highest annual return. Does X have the best portfolio manager? Speculators bring excessive volatility to stock markets. Should we limit speculation? Speculators bring excessive volatility to stock markets. Should we limit speculation? How to support local financial market? Russian companies should make IPO at home, pension funds should not invest abroad How to support local financial market? Russian companies should make IPO at home, pension funds should not invest abroad Central Bank’s reserves are mostly invested in foreign government bonds Central Bank’s reserves are mostly invested in foreign government bonds Russia’s stabilization fund has accumulated more than $15 bln. Why not invest in domestic projects? Russia’s stabilization fund has accumulated more than $15 bln. Why not invest in domestic projects?

5. NES FF 2005/06 5 Financial institutions Basic questions Basic questions –Existence –History –Evolution –Convergence Financial markets Financial markets Financial instruments Financial instruments Financial intermediaries Financial intermediaries

6. NES FF 2005/06 6 Financial markets Investors vs borrowers Investors vs borrowers Listing requirements Listing requirements Depositary receipts Depositary receipts Counterparty risk Counterparty risk Information transparency and insiders Information transparency and insiders

7. NES FF 2005/06 7 Financial instruments Cash flow vs control rights Cash flow vs control rights First vs second level First vs second level Indices Indices

8. NES FF 2005/06 8 Financial intermediaries Private vs institutional investors Private vs institutional investors Solving agency problem Solving agency problem Asset transformation Asset transformation

9. NES FF 2005/06 9 Asset pricing Time dimension: analysis under certainty Time dimension: analysis under certainty –Fixed income –Capital budgeting Cross (risk) dimension: analysis under uncertainty Cross (risk) dimension: analysis under uncertainty –States of nature –Arbitrage pricing

10. NES FF 2005/06 10 Asset pricing (2) Portfolio optimization Portfolio optimization –Diversification –Selectivity vs timing Equilibrium models Equilibrium models –Risk factors: expected returns vs volatility

11. NES FF 2005/06 11 Further topics Corporate finance Corporate finance –Capital structure –IPO, M&A –Corporate governance Econometrics of financial markets Econometrics of financial markets –Market efficiency Risk management Risk management –Market vs credit risk Behavioral finance Behavioral finance Law and finance Law and finance

12. Conclusions Если вам показалось, что я выразился слишком ясно, вы, должно быть, неверно меня поняли