International Capital Markets

Priority Reg: IFEP Concentration. By the end of this course, students will have an up-to-date picture of how institutional investors and financial intermediaries provide capital globally to start-up companies, established companies, households, and governments. You will be able to read the Financial Times or the Wall Street Journal, understand most of the terms, and pick out some of the folk wisdom that does not fit with economic theory. You will be ready to use risk management tools, including derivatives, options, futures, and asset-backed securities, if they arise on the job. Additionally, you will understand the economic role of hedge funds, collateralized loan obligations, SPACs, private equity, private credit, and securitization. You will gain insight into the important role of mathematical models and their limitations for practitioners in modern finance. The course will enable you to follow debates on Libor reform and the move in the U.S. to SOFR, regulation of hedge funds and banks, and international tax issues. You will understand the origins and transmission mechanisms of the financial crisis and be able to assess the policy responses around the world. Furthermore, you will appreciate how central banks are grappling with post-pandemic inflation and the implications for securities pricing.

We will not delve deeply into why a firm might prefer fixed or floating-rate debt or determining the desired mix between debt and equity, as these topics are covered in corporate finance classes. Nor will we discuss why consumers borrow or lend to smooth out consumption over their life cycle, which is a topic for microeconomics. Finally, we will leave government borrowing and monetary policy to macroeconomics and political science classes. However, we do need to keep abreast of monetary policy to anchor our understanding of interest rates and the yield curve. Our primary concern in this class is how participants in capital markets get things done.