The course is an introduction for students with a strong background in math, quantitative modeling, econometrics, and machine learning who are interested in a career in finance. The course features conferences with industry experts and covers all aspects of the financial industry, aiming to equip students with critical knowledge about their future environment.

Motivation

This is an introductory course designed for students with a strong background in mathematics, quantitative modeling, econometrics, and machine learning who are interested in pursuing a career in finance. The course is designed to equip students with the necessary knowledge to contribute effectively in their next role in the financial industry.

The course is designed around a series of conferences featuring industry experts who possess extensive experience and specialized in key topics. The course introduces a novel perspective on the financial system, portraying it as a network of intermediaries where agents and market participants inherit, re-structure, and exchange various types of risk. As financial markets are complex ecosystems with inputs and outputs, it is essential to have a thorough understanding of their operation. This course covers all aspects of the financial industry that are not typically addressed in traditional courses, with the objective of providing students with critical information about their future environment.

1. Organization of the Financial System: This module covers the structure and organization of the financial system, including the roles of various participants such as banks, investment firms, and regulators.
2. Market Microstructure and Flow Trading for Intermediaries: This module explores the trading strategies and market dynamics used by intermediaries such as banks and hedge funds.
3. Structured Products: Investment Banks offers & Investors needs: This module covers the various structured products offered by investment banks and the needs of investors who use them.
4. Risk Management at the Scale of an Investment Bank: This module examines the various risks faced by investment banks and the strategies used to manage them.
5. Post 2008 Crisis Regulation: This module covers the regulatory changes that were implemented following the 2008 financial crisis.
6. The Investment Process in a Changing World: This module explores the investment process in a changing world, including the use of technology and alternative data.
7. AI and the Financial System: Will Intermediaries be Disintermediated? This module examines the role of artificial intelligence in the financial system and its potential to disrupt traditional intermediaries.
8. Alternative Data Changing the Investment Process: This module covers the use of alternative data in the investment process and its impact on traditional financial analysis.

By the end of the course, students will be equipped with the knowledge and skills they need to make informed decisions in the financial industry, and to understand the immediate neighborhood in which they will be operating.

Course Material

Further readings

The following is a list of documents that may be of interest to those who want to explore the topics covered in this course further. These resources are relevant to the course material presented and provide additional insight into the concepts and techniques discussed. Where applicable, specific sections of interest are highlighted.

Organization of the Financial System

1. Market Making: Section II and III link

2. Contributions of the financial system to the economic growth: Section II link

3. Debt maturity transformation: Section I and II link

4. Collateralization: Section I and III link

5. The Clearing: Explain CCP mechanism using the Introduction and Section I link

6. Corporate bonds link

Market Microstructure and Flow Trading for Intermediaries

1. Transaction Costs Analysis: Emphasis on bid-ask spread and market impact link

2. Demystifying Hedge Funds (2006) link

3. OTC Derivatives – A Primer on Market Infrastructure and Regulatory Policy: Section “G-20 policy discussion” link

4. Electronic trading in fixed income markets: Section II link

5. HIGH LATENCY TRADING (HLT) link

Structure Products:

1. OTC Derivatives Market Analysis Year-End 2012 link

2. Collateral use (ISDA Margin Survey): Section II link

3. Collatéral: les nouvelles pratiques (ISDA Margin Survey): Sections 5, 6 and 7 link

4. Structured products: five steps to assess counterparty risk link

5. Template for structured product description link

Risk Management at the Scale of an Investment Bank

1. Risk seen by a Nobel Prize (in physics): Personal observations on the reliability of the Shuttle by R. P. Feynman link

2. Define Model Risk: Theory and Practice of Model Risk Management, Riccardo Rebonato link

3. Measuring Model Risk: Page 1 to 12 link

4. Yield curve: Collateral consistent derivatives pricing FRIC Practitioner Seminar, Linderstrom: Page 1 to 10 + conclusion link

5. Financialization of commodities: Page 1 to 29 link

6. The volatility smile: Laughter in the Dark - The Problem of the Volatility Smile, Derman: Page 1 to 10 link

Post 2008 Crisis Regulation

1. G20 Pittsburgh link

2. EMIR regulation link

3. Circuit breakers link

4. The Mechanics of Collateral Costs for OTC Derivatives Trades in the US link

5. Front Running of Block Transactions link

The Investment Process in a Changing World

1. Investment Committees: Vanguard views of best practices link

2. Best Practices in the Pension Funds Investment Process: chapter “diversification is a necessity” link

3. Managing Investment Risk in Defined Benefit Pension Funds: Section “Measuring risk – from the actuarial valuation to fair value” link

4. Good Practices in Risk Management of Alternative Investments by Pension Funds. link

5. Three Challenges of Investing: Active Management, Market Efficiency, and Selecting Managers* Remarks by John C. Bogle Founder and Former Chairman, The Vanguard Group link