1w FinEcon 2024fall v1

Summary

Professor Caleb Kim introduces the course on Financial Economics, covering financial transactions and products. He shares his background, including his education at Korea University and a PhD from HUK University, focusing on market instruments like OIS and IRS. With experience as Chief Risk Officer at Numa Korea, he discusses his expertise in financial risk management, particularly in the OTC derivatives industry. The course will explore financial instruments, derivatives, and risk management, aiming to provide a comprehensive understanding of financial markets.

Takeaways

• 📚 The course focuses on Financial Economics, covering financial transactions and products.
• 👨‍🏫 The instructor, Caleb Kim, has a background in financial engineering and has worked extensively in financial risk management.
• 🎓 Caleb Kim's educational journey includes a Bachelor's from Korea University, a Master's in financial engineering, and a PhD from HUK University of Foreign Studies.
• 🏢 He has professional experience at NH Investment Securities and Numa Korea, where he was the Chief Risk Officer.
• 💼 Caleb Kim's expertise lies in managing market risk, credit risk, regulatory risk, and operational risk in the OTC derivatives industry.
• 📈 He was part of a working group that established the KRW risk-free rate, which is a significant development in the Korean financial market.
• 🌐 The course will explore financial instruments like futures, options, and swaps, and their role in risk management and market operations.
• 📖 Recommended reading includes 'Fundamentals of Futures and Options Markets' by John C. Hull, available in both English and Korean.
• 💡 The course aims to provide insights into financial instrument dynamics, price setting, and effective financial risk management.
• 🌟 The concept of financial economics is illustrated through the life cycle consumption and income graph, highlighting the need for financial tools to balance income and consumption over time.

Q & A

What is the name of the instructor mentioned in the script?

The name of the instructor is Caleb Kim, but he prefers to be called HKB.

What is the instructor's area of expertise?

The instructor's area of expertise is Financial Risk Management, particularly in the OTC derivative industry.

What does OTC stand for in the context of the script?

OTC stands for Over-The-Counter, which refers to financial products traded outside of exchange markets.

What is the role of CSA in OTC derivative trading?

CSA stands for Credit Support Annex, which is a self-contained contract that forms part of the ISDA Master Agreement. It explains what collaterals can be used and how to post and take them back, including the costs involved.

What is the significance of the KW risk-free rate mentioned in the script?

The KW risk-free rate is a rate that is nearly risk-free, with a default probability close to zero. It is used as a reference rate in financial markets and was established by a working group that the instructor was a part of.

What was the instructor's contribution to the establishment of the KW risk-free rate?

The instructor was part of the working group that discussed and decided on the KW risk-free rate, engaging in discussions with the Bank of Korea (BOK), the Financial Supervisory Service (FSS), and the Korean Exchange (KRX).

What is the difference between a traditional interest rate swap and an overnight index swap?

In a traditional interest rate swap, one party pays a fixed rate and receives a floating rate like LIBOR. In an overnight index swap, the floating rate is based on an overnight rate index, such as SOFR or SONIA, which reflects the cost of borrowing overnight.

What is the purpose of the course on Financial Economics mentioned in the script?

The purpose of the course is to study various financial instruments and markets, focusing on how they work together, how prices are set, and how to manage financial risks effectively.

What are the key areas covered in the lecture plan for the Financial Economics course?

The key areas covered include introduction to financial derivatives, future and forward contracts, option pricing models, option trading strategies, and swap and risk management.

What is the recommended textbook for the course, and is there a Korean version available?

The recommended textbook is 'Fundamentals of Futures and Options Markets' by John C. Hull. Yes, there is a Korean version available for those who prefer to read in Korean.

How does the instructor plan to make the course material accessible to students who might not be familiar with financial jargon?

The instructor plans to present the material in a simple, concise, and easy-to-understand manner, focusing on key concepts from each topic to help students grasp the essentials and manage their financial wealth and career.