Category Archives: Course material

Greece repays IMF using the IMF’s own “currency”

Greece this week repaid €750m to the International Monetary Fund (IMF) which it funded by drawing on its SDR account at the IMF. This legitimate but unusual move caught many commentators by surprise and drew attention to the little known SDR. * The SDR – Special Drawing Right – is something of a curiosity in… Continue Reading

Why is it riskier to be a worker than a capitalist?

We take it for granted that capitalists hire workers rather than workers hiring capital, but why? The main reason is the difficulty of diversifying labour, which means that workers ideally require some form of insurance to offset their concentration of risk. But that is only imperfectly available through the market and this is an important… Continue Reading

Money, money, money – three different meanings

Money can mean physical cash, or the funds in a bank account or the flows of short term funding used by government and companies. No wonder finance can be confusing. * Finance is a subject bedevilled by jargon – words, phrases and acronyms that are barriers to understanding the relatively simple things that actually go on… Continue Reading

US inflation: still showing no signs of being a problem, let alone hyperinflation

Every year when the new MFin class starts, there is usually at least one person who asks the question: when will QE cause a big rise in inflation? The person is often from a hedge fund or trading background because that seems to be where this point of view is most commonly found. The assumption is… Continue Reading

Could we do without physical money?

Physical money is becoming increasingly unnecessary in everyday life. Could it be heading for extinction and does it matter? I’ve just spent three days on holiday in the wonderful city of Copenhagen, using physical cash only once (when the ice cream seller’s card machine was broken, and the ice cream is really good so I couldn’t… Continue Reading

The decline in volatility: measuring risk aversion from option prices

Although the world appears a very turbulent place, financial volatility is currently rather low. How do we know this? One method widely used by commentators and market analysts is to refer to a measure of global risk aversion called the VIX. This post explains how can we infer something about market participants’ attitudes to risk, based on option pricing theory… Continue Reading