Description

Financial
markets represent the lifeblood of our global economy. These mechanisms promote
greater economic efficiency by transferring funds from individuals, businesses
and governments with an excess of available funds to those with a shortage.
Funds are transferred in the financial markets through the purchase and sale of
financial instruments (such as stocks and bonds). Short-term financial
instruments are available in money markets, while longer-term financial
instruments are purchased and sold in the world’s capital markets. Many financial
markets have been in existence for hundreds of years; however, the modern era
has brought along many new innovations such as securitizations, derivatives,
and cryptocurrencies.

This course reviews the
economic variables that influence financial market activity. The first part of
the course covers interest rates: what they are, how they are calculated, and
some of the theories behind. It reviews the different types of interest and how
interest rates affect the pricing of interest-bearing financial instruments,
such as bonds. It also discusses how interest rates are derived under the
‘loanable funds theory’. It also looks at the risk structure of interest rates
and illustrates how to calculate a bond’s yield given specific information
regarding its risk structure.

The second part of this
course covers central banking and monetary policy. It reviews the role that the
Federal Reserve System (a.k.a. the Fed) plays in financial markets. It also
looks at the tools used by the Fed to conduct its monetary policy and explains
how these tools impact the U.S. money supply. Finally, it reviews the two
measures used by the Federal Reserve to estimate the U.S. money supply (M1
& M2).