Category Archives: Financial products

Why MFin students are a good fit with central banks

Central banks, which are the most important financial institutions in most countries, have typically employed lots of economcs graduates in the past. They might benefit from adding a few finance graduates in future. Central banks have responsibility for controlling inflation and influencing the wider economy. In some nations they also have responsibility for regulating the financial… 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

Meeting Merton

It is rare to meet your heroes. I wouldn’t exactly describe Professor Robert C. Merton as one of my heroes – I’m not sure I have any heroes actually – but he is somebody I admire greatly. He is probably the most distinguished financial economist in the world today. He won the Nobel prize (*) … Continue Reading

Islamic banking: small but fast growing

In the wake of the financial crisis, which showed the surprisingly fragile state of conventional western banks, people have looked for alternative ways of delivering financial services, especially credit. The IMF recently compared two types of banking that may offer lessons: cooperative banks and Islamic banking. Cooperative banks are owned by their depositors. They may… Continue Reading

Regulation leads to innovation

The Chinese government is in the process of deregulating interest rates. It took the first step in July 2013 when the People’s Bank of China (PBOC) freed the banks to set the rate charged to borrowers, other than some mortgage-related restrictions. It is expected soon to stop controlling the rate paid by banks to depositors.… Continue Reading

Analysing changes in long term interest rates: the term premium in US Treasury bonds

Long term interest rates, as captured by the yield on long term US Treasury Bonds, have recently swung upwards after falling for three decades. It’s still too soon to say that the long bull market in bonds has ended, because rates could fall again, but yields are at historically low levels still so the scope… Continue Reading

Commodities don’t help an investment portfolio

Investing in commodities (oil, gas, metals etc.) has gone from being a niche activity to a mainstream portfolio choice in the last fifteen years. This was driven by the long period of fast growth of commodity prices, which made a number of people very rich. The wider argument for commodities investment though has been that… Continue Reading

How to bankrupt a bank

The aftermath of the global financial crisis left many people with an impression of modern finance as extraordinarily complex, a web of multi-layered securities financed through strange off-balance sheet vehicles and held together by impenetrable mathematical formulas. There is something in this account but it’s important to remember that the most important reasons for bank… Continue Reading

The dark side of share trading

A New York Times article recently reported data from Rosenblatt Securities showing that the percentage of total US stock trading done “off-exchange” has risen from about 15% in 2008 to over 35% in 2013 and occasionally as high as 40%. What does this mean? Conventionally, stocks (shares) are traded on an exchange, which is an organised… Continue Reading