Financial Markets

This class provides an introduction to financial markets. We cover major financial instruments -- bonds, bank loans, equity and derivatives -- and how their prices are determined. What are the key financial institutions that lend, provide liquidity and make markets. What role does the government play through regulation, monetary policy, bailouts and other interventions during financial crises. First we teach basic principles of modern finance. Then we focus on recent developments (digital currencies provided by central banks or the private sector, climate finance.) An important component of the course are online games that we play to mimic what we see in financial markets. These games highlight the importance of heterogeneous investor beliefs, risk exposures, and market frictions for asset trading and valuation.