Over the last 2 years or so, the world's financial system has gone through its greatest crisis since the Great Depression. Severe financial problems have emerged simultaneously in many different countries, and the economic impacts are being felt throughout the world as a result of the increased interconnectedness of the global economy.
The purpose of this seminar is to give you a thorough understanding of how this crisis is changing the global financial landscape and to provide you with the insight, inspiration and tools to meet the challenges that face the financial industry of the future. The seminar is organized into four parts.
First, we describe what went wrong, and the extent to which the crisis challenges past intellectual assumptions about the self-correcting nature of financial markets. We explain the interplay between macro-imbalances and financial market developments and innovations which have accelerated over the last ten to 15 years and which have lead to the growth of the "shadow banking system". Specifically, we explain and discuss the how increased use of leverage, changing forms of maturity transformation, over-reliance on sophisticated mathematical models, the "procyclical" effects of ratings, rating triggers, margins and haircuts, and the failure of market discipline have contributed to the crisis.
We then discuss possible changes to banking regulation and supervisory approaches that will evidently follow from the crisis. We explain what actions are required to create a stable and effective banking system, and we discuss the possible implications for capital and liquidity requirements (Basel II, Solvency II etc.). We also look at proposed changes to accounting principles (e.g. "fair value" accounting and the accounting for off-balance transactions) and we discuss how rating agencies will be regulated in the future.
Further, we describe and discuss a set of wider issues raised by the crisis. These include the need for a strengthened market infrastructure for trading, clearing and settlement and for new and more comprehensive risk management tools and methods. We also discuss the changing roles of hedge funds, private equity funds, investment banks, prime brokers, rating agencies and other market participants.
Finally, we discuss recent and future developments in markets for investment products, derivatives, asset-backed securities etc. We explain what will be the driving forces behind these developments and we give practical examples of how these products can be used optimally in portfolio and risk management under the changing assumptions imposed by the crisis.