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.
