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The Global Financial
Markets (GFM) Suite of Courses:
GFM as a FY Elective
4-week intense GFM course offered at the end of the FY program. Syllabus
below.
GFM as a SY Elective (subject to
faculty availability)
GFM in seven weeks, offered in the SY program
No guest discussion leaders in GFM as a SY course.
ADVANCED GFM
A
SY elective that provides an opportunity
to explore some of the biggest issues in international finance.
Prerequisite: GBUS 7602 (GFM).
GLOBAL FINANCIAL MARKETS
as a FY Elective FY Elective:
Global Financial Markets
Instructor: Frank Warnock
GBUS 7602
March 21 – May 3, 2016
IN THIS CLASS, LAPTOPS MUST REMAIN
CLOSED AND MOBILE DEVICES MUST BE PUT AWAY.
The dollar surging, oil price
plummeting, eurozone’s existential crisis, negative interest rates in many
countries, the Fed tightening for the first time in a decade…this is the
backdrop for this spring’s GFM course.
• The dollar usually trends for long
periods. After being range bound for a few years, it has recently
appreciated against many currencies. What explains recent currency
movements, and what will the likely directions be for the rest of 2016 and
beyond?
• Long-term U.S. interest rates were at historical lows of 1.5%
in the summer of 2012, doubled to 3% by end-2013, and in early 2016 were
languishing at (the still historically low) 2%. What are the likely
movements of long-term rates in 2016 and 2017?
• Just a few years ago
yield curves in many industrial countries were quite steep, with the U.S.
yield curve being about as steep as it ever gets. More recently yield
curves have flattened somewhat. Does this suggest a coming recession, or
are we in for a sustained, strong global recovery?
• How do we think
about commodities—especially oil—as an asset class? Where are oil prices
headed in 2016 and 2017?
• The last time the dollar appreciated sharply
many EMEs had a crisis. Is this time different? Where are EME currency,
bond rates, and equity prices headed over the next year?
In Global
Financial Markets, we will tackle these issues and more. The main
objective is to develop the technical skills that enable students to
improve their understanding of current conditions—we primarily use
"real-time" cases and very current data—in global financial markets,
especially those for currencies and interest rates. We focus on global
financial markets, but because interest rates and exchange rates are
driven by, among other things, the state of the economy, and in turn
impact future economic performance, students can use this course to
solidify their knowledge of global economics.
Throughout, our
thinking will be anchored in models—technical notes will both elaborate on
the models and help the students translate them into actual data
series—but our applications will be from the real world. The anchoring in
theory is important: In your careers you will come across many ‘fad’
explanations for why the past didn’t turn out as planned or why the future
will be different. With the experience of applying a small toolkit of
theory to many situations, you will have the ability to examine fad
explanations—indeed, any explanation—within a tight logical framework.
The course will include cases, technical notes, outside readings from
the Street and elsewhere, and current data to analyze. Course grade is 40%
Participation, 20% Country Presentations, and 40% Final Exam.
I
will assume, from Day One, knowledge of the macro models from Core GEM,
especially the 3Pane model. You will enjoy the course more if you review
GEM models prior to the first class meeting. You will almost certainly
dislike the course if you’re not comfortable with those models on Day One.
You are expected to be in class every day, but especially on the
presentation days (April 25 and 26). Plan accordingly.
AGENDA IS SUBJECT TO CHANGE. IF IT
DOES, YOU WILL BE NOTIFIED.
Class 1 (March 21) Economics and
Forecasts Outlook 2016: Stuck in a Rut (The Bank Credit Analyst, 67
(7))
Class 2 (March 22) Long-term U.S. Interest Rates (1)
"Janet Yellen: Navigating Uncharted Waters" (UVA-GEM-0134); "The
Determinants of Interest Rates" (UVA-BP-0489)
Class 3 (March 28) Long-term U.S.
Interest Rates (2) "Janet Yellen: Navigating Uncharted Waters"
(UVA-GEM-0134); "The Determinants of Interest Rates" (UVA-BP-0489)
Class 4 (March 29) The Information
Content of the Yield Curve "Yield Curve and Growth Forecasts”
(UVA-GEM-0106); "The Determinants of Interest Rates" (UVA-BP-0489), pages
9-13
Class 5 (April 4) Euro
Area "Draghi’s Commitment" (UVA-GEM-0113)
Class 6 (April 5) The USD
in the Long Run "Global Asset Allocation: Whither the U.S. dollar?"
(UVA-F-1591); "Exchange Rate Models" (UVA-BP-0496)
Class
7 (April 11) Currency Trading and Fundamental Factors "Prospective
Capital Flows and Currency Movements: Euro vs. Canadian Dollar"
(UVA-GEM-0124); “A User’s Guide to the BOP and IIP: The (Incomplete)
Transition from BPM5 to BPM6” (UVA-GEM-0135)
Class 8 (April 12)
Currency Crises "Currency Crises in the UK and Hong Kong"
(UVA-GEM-0108)
Class 9 (April 18)
Commodities as an Asset Class: Oil "Global Asset Allocation: Crude
Calculations" (UVA-F-1647)
Class 10 (April 19)
Global Asset Allocation “Global
Asset Allocation: Investing in a Time of Debt, Deficits, and Quantitative
Easing” (UVA-F-1738)
Classes 11 and 12 (April 25
and 26) Country Presentations
Class 13 (May 2)
Students’ Choice
Class 14 (May 3) Wrap Up
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