How the Financial Markets really Work


Overview and Introduction

• Functions of the world’s Financial Markets – Transferring Funds and Risk
• What are efficient Markets? Markets as forward discounting mechanisms
• Role of the Regulator
Sell-Side (Investment Banks) vs Buy-Side (Institutional Investors)

The Foreign Exchange & Money Markets

• Overview and scale of the FX markets
• Currency Popularity - Dollars, Euro, Sterling, Yen.
• Spot, Cross and Forward Exchange rates
• Interest Rates - LIBOR & Money Market instruments as warning indicators
Case Study - Which are the most popular Currency pairs in the Markets?

The Bond Markets

Fixed Income basics – what is a Bond exactly?
The importance of Sovereign Debt Markets, Risk free investing?
Bond Pricing – Coupons and Yields
Sub-Prime & the Credit Crunch explained
Corporate Bonds and Credit Ratings – role of the Rating Agencies
Case Study - Credit Spreads across a range of European Sovereign issues

The Equity Markets

• Equities in context – Shareholders at the end of the food chain
• Corporate actions in the secondary markets – Share Splits, Rights Issues, Buybacks
• Preference Shares, Treasury Shares, Depositary Receipts
• High Frequency Trading & Dark Pools
• What should we expect from Equities as an investor?
Equities as a source of income – the importance of Dividends
Case Study – Where are the largest Exchanges? – a changing world

The Derivatives Markets – Options, Swaps, Futures

Derivatives, what are they exactly? Exchange Traded vs OTC
Options – Terminology, for Hedging or Speculation?
Swaps – Interest Rate and Credit Default swaps; Counterparty risk
Futures – Margin requirements and Leverage – Risk and exposure, role of the Clearing House
Trading Futures in practice (film) – Chicago Mercantile Exchange