FNCE 4070 – Final Exam Study Guide Bring a working calculator – you will need it. Do not cheat off of your neighbor - it’s not worth it. This is 40% of your grade. Review the midterms Review the homework exercises. Review the chapters – We covered 1, 2, 3, 4, 5, 6, 9, 10, 11, 13, 15, 16, 17, and (on insurance) There are some additional readings that I have assigned. Review the slides that I have given you. Topic Highlights include: Asymmetric Information – Moral Hazard and adverse selection Financial Intermediaries – what are they and types Inflation – causes and types of inflation Money Market Instruments – what they are, formulas etc. for commercial paper treasury bills Basic Bonds – present value and duration, return analysis on bonds, supply and demand for bonds, relationship between bond price and yield, effect of changes on interest rates on bonds Foreign Exchange – which way rates are quoted, arbitrage, supply/demand analysis, central bank interventions, cross rates, forward rates and relationship with interest rates, pegged currencies and joining the euro, Central Bank interventions European Crisis – issues surrounding Greece. Securities Lending – Mechanics of securities lending, applications and AIG involvement. What went wrong for AIG? Credit Derivatives – What are they, basic mechanics – cash flows before default and after a credit event, what are credit events, applications, securitization of mortgages, what is a multi-sector CDO and AIG involvement Formula sheet from Midterm 1 Stock markets – types of orders and order book manipulations, arbitrage, return on stocks, pairs trading, shorting stocks, market makers, brokers, exchanges etc. Central Banks and Fed Reserve – tools of monetary policy, balance sheet – assets and liabilities, monetary base, money supply, open market operations, fed funds rate, FDIC, supply/demand on reserves, central bank independence Bank balance sheets – assets and liabilities, interest income and expenses, changes to the balance sheets, bank management (liability, capital etc.) Expected Return and standard deviation Efficient Markets Hypothesis Term Structure of Interest Rates – theories (expectations, liquidity premium and market segmentation), supply and demand arguments, theories of term structure, forward interest rates, arbitrage with forward interest rates.
FNCE 4070 – Final Exam Study Guide Bring a working calculator – you will need it. Do not cheat off of your neighbor - it’s not worth it. This is 40% of your grade. Review the midterms Review the homework exercises. Review the chapters – We covered 1, 2, 3, 4, 5, 6, 9, 10, 11, 13, 15, 16, 17, and (on insurance) There are some additional readings that I have assigned. Review the slides that I have given you. Topic Highlights include: Asymmetric Information – Moral Hazard and adverse selection Financial Intermediaries – what are they and types Inflation – causes and types of inflation Money Market Instruments – what they are, formulas etc. for commercial paper treasury bills Basic Bonds – present value and duration, return analysis on bonds, supply and demand for bonds, relationship between bond price and yield, effect of changes on interest rates on bonds Foreign Exchange – which way rates are quoted, arbitrage, supply/demand analysis, central bank interventions, cross rates, forward rates and relationship with interest rates, pegged currencies and joining the euro, Central Bank interventions European Crisis – issues surrounding Greece. Securities Lending – Mechanics of securities lending, applications and AIG involvement. What went wrong for AIG? Credit Derivatives – What are they, basic mechanics – cash flows before default and after a credit event, what are credit events, applications, securitization of mortgages, what is a multi-sector CDO and AIG involvement Formula sheet from Midterm 1 Stock markets – types of orders and order book manipulations, arbitrage, return on stocks, pairs trading, shorting stocks, market makers, brokers, exchanges etc. Central Banks and Fed Reserve – tools of monetary policy, balance sheet – assets and liabilities, monetary base, money supply, open market operations, fed funds rate, FDIC, supply/demand on reserves, central bank independence Bank balance sheets – assets and liabilities, interest income and expenses, changes to the balance sheets, bank management (liability, capital etc.) Expected Return and standard deviation Efficient Markets Hypothesis Term Structure of Interest Rates – theories (expectations, liquidity premium and market segmentation), supply and demand arguments, theories of term structure, forward interest rates, arbitrage with forward interest rates.