6.9. Wrap-up and conclusions. Positive messages and practical advice

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来自 Moscow Institute of Physics and Technology 的课程

Capital Markets and Financial Institutions – How to Survive Them

4 个评分

Moscow Institute of Physics and Technology

Capital Markets and Financial Institutions – How to Survive Them

4 个评分

课程 1（共 5 门，Specialization Understanding Modern Finance）

Capital markets and financial institutions are all around us. This is an enormous industry in which powerful players oftentimes challenge investors and the public at large and expose them to significant risks. This Course provides for the deep understanding of the core ideas, concepts, and mechanisms of the modern capital market in a learner-friendly way. We will analyze the market’s most fundamental problems, realize the intrinsic interests of the market participants, reveal the true meaning of certain financial terms, and uncover credible signals of the likely behavior of economic agents – all that with little math and a lot of fun. The learners will be much better positioned with respect to the financial environment. They will see through the financial news, reveal the risks of the financiers’ wishful thinking promises, and protect themselves against dangerous adventures. The learners will get the opportunity to use the obtained knowledge, skills, and understanding for the successful professional career in the financial and other business areas, as well as in their day-to-day life.

从本节课中

СМО and the 2008 World Financial Crisis. The Ascent of Moral Hazard. Globalization. Wrap-Up. Some Positive Messages

Week 6, the final week of the Course covers securitization and CMO’s. We will reveal the role of the CMO market in the development of the world financial meltdown that peaked in 2008 and, as many believe, is not yet over. We will study the details of the role of CMO’s in the development of the crisis. We will consider the measures taken by the regulators, the “too big to fail” phenomenon, and will understand why the governments so actively helped the biggest international investment banks found to have been on the verge of bankruptcy. We will also talk about the globalization of capital markets and the first signals of a counter-trend – de-globalization. We will clearly see how modern geopolitical and technological trends contribute to the ascent of moral hazard that is now a global problem. Finally, some clear and useful recommendations are provided. As a result, you will be able to successfully apply the obtained knowledge and skills not only in finance but also in your career and life in general.

6.1. CMO – the idea14:51

6.2. CMO – the mechanism, cash flows, and risk12:11

6.3. CMO and the crisis (1) – the market, mortgage brokers, and substandard mortgages5:14

6.4. CMO and the crisis (2) – securitization, CMO tranches, credit rating and insurance, SPV. Toxic assets6:32

6.5. “Too Big to Fail”8:06

6.6. Globalization in capital markets and its challenges7:46

6.7. What has been done to fight the crisis? New regulation, QE, negative interest rates18:46

6.8. The first signs of “de-globalization”. Brexit. Problems and challenges7:58

6.9. Wrap-up and conclusions. Positive messages and practical advice10:34

与讲师见面

Konstantin Kontor
Director and Professor of Finance and Strategy
American Institute of Business and Economics (AIBEc)

I welcome you all in the final episode of

the six-week and the whole course in Capital Markets and Financial Institutions.

Now is the time to wrap-up and provide some positive messages for all of you.

Well, this course has been about the problems,

issues, and challenges caused by private information.

So, if we recalled the very first chart here with these final savers,

these users of the money and we said that initially,

the flow of money was like this.

And then, we said that this is not efficient and as a result here,

this is a demand for the services of financial institutions or financial intermediaries.

And then, the flow of cash results in the following.

So, it goes like this.

Well, sometimes, there still are

some direct flows here but they do not play such a key role.

So, we said that although these red skyscrapers, they are expensive,

they may, as we will see in just a moment,

result in so far the problems but they still make this whole set-up more efficient.

And that was our first finding, and we said, great.

But then, we started to go further and we said,

well, together with this,

the problems caused by private information namely moral

hazard that starts to go up at the next level.

For example, what we did, let's say,

the initial moral hazard resulted in the financial institutions.

But then, let's say,

we started banks in greater detail but that unfortunately,

results in the need to provide deposit insurance.

Otherwise, bank cannot operate.

That in itself results in abuses and these abuses,

they provide the demand for regulation.

And then finally, well,

this results are too big to fail.

So, you can see that this is sort of,

well, I put it in linear thing,

but this is sort of a vicious spiral that goes like this.

So, we use the term like,

The Ascent of Moral Hazard,

we quoted Niall Ferguson with his book,

The Ascent of Money and we said that together with money, together with capital,

so does the moral hazard go up at the next and next level.

So that was all about this.

And we studied various facets of this setup,

various functions and challenges and problems and solutions provided by the participants,

and that was the analytical framework of what we did.

The good news was that,

we have been able,

with the use of very little math and not a very advanced one,

go very deeply in the core of the problems

that are key in shaping up more than a financial institutions,

banks, investment banks, insurance companies,

brokers, and many others.

So, this is sort of the analytical wrap-up but

the problem is that it does show what is the key story here,

but it does not provide positive messages.

Now, positive messages here can be broken down in two parts.

And I would put them like this.

Positive messages to you.

Well, I will start with the message that is, as a result,

positive although the description of that sounds,

sort of if not negative but kind of scary.

Now, I'll put it like this.

The risk reduction and control,

and the idea here is very simple.

What we've learned about capital markets provides us with

some instruments to reduce our risk exposure.

Oftentimes, we are small and the institutions that operate in this market,

they are large, powerful,

and it seems that it is difficult for us to protect ourselves,

to not to become the victim of

the potential abuses or some behavior of this institutions.

Well, there are very simple recipes here.

When you deal with financial institutions,

you have to first of all, ask questions,

read all the documents thoroughly,

and when you ask these questions,

you'd read the answers or [inaudible] thereof as a strong signal.

If you ask the question and you don't get the answer or people say something else,

this is a strong signal that is pretty bad that

you're likely to encounter a problem in the future in interacting with this institution.

If however, you do get an answer even if not the pool,

this is a positive signal.

So, you always have to keep this in mind that signals in capital markets are

more powerful than words and that should not be ignored.

Then, another thing which is in the same area,

you know that oftentimes,

you already know how to see the big picture,

and although the instruments and details may be quite different but

the overall idea about all financial securities,

contracts, instruments, and so on and so forth, they are all,

if not the same,

but they're talking about the same ideas.

So you keeping this in mind are actually equipped

with important instruments to be able to analyze that even as an individual,

to say nothing of the fact on what happens if you work for a professional company.

And now, the next thing though is that people would say,

how to profit from them?

Well now,

some people may wish that I would answer right now but unfortunately,

in order to profit from capital markets,

we have to study something else namely,

we have to study value, how it's produced,

where it comes from,

and the process evaluation about how we can calculate what it is.

And all that is studied in our next course that is devoted to corporate finance.

But, what is nice is that when we study corporate finance,

we will keep in mind all our knowledge of capital markets and

many things will become clear to us from the very beginning.

So, we may say that profiting from that is a little bit postponed,

but that is not because we could not introduce all that right now,

that will just make the course too long,

and that is why that is the issue of another course.

Now, there is another important thing that sort of combines these two.

Most of the issues that we studied using capital markets as the area or as the field,

these issues, they repeat themselves in

the real life and also in business life and even in personal life.

Many events, their sources

and their results are very much alike to what we've seen in the dealt of capital market.

Sometimes, it helps if you keep this in mind and it did

help to many of the people who studied this course in an offline form.

I've got significant feedback when people shared

with me how the use of these instruments,

and then the understanding of that helped them in their real life.

And then, my final message to all of you is the following.

You have been able to really reach the deep level of

understanding with the use of some limited formulas

and math by just solving the problems or

analyzing the situations that we tackled in this course.

This is the way that to properly complete the course,

you have to cope with the final assignments in which I wish you all a great luck.

And now, we are coming to a point at which I have to say that unfortunately,

there is no way to properly wrap-up or better to say, complete this.

Because capital markets are developing,

we have followed through this process of development

but we just broadened our horizon and now,

we can ask some big questions and

sometimes the questions that no one knows the answers to.

So, I wish you to stay bold in facing these challenges,

and I thank you all for having spent time and effort in studying this course.

And I wish you all great luck and hopefully,

I'll see you soon in the other courses of this [inaudible] civilization. Thanks again.

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