garvia.es

Foundations of Finance (FoF) – Session 2

NYU | January 21, 2026
Instructor: Luis Garvía Vega
Duration: 1h 14min

1. Purpose of the Session

This second session had four main objectives:

  1. Reinforce and consolidate the core ideas introduced in Session 1
  2. Clarify what finance studies and why it focuses on the future
  3. Introduce the concept of financial instruments in a precise way
  4. Provide a first structured overview of bonds, equity, and derivatives

No heavy mathematics were introduced yet.
The focus remained on conceptual understanding and intuition.

2. Transcripts, Information, and Finance

The session began by clarifying the role of transcripts and recorded material.

2.1 Why Transcripts Exist

Finance is fundamentally about the future,
and information is the key tool to manage uncertainty about the future.

Transcripts are therefore part of the information management system of the course.

3. What Is Finance? (Student Brainstorming)

Students were asked to associate one word with “finance”.

Common responses included:

3.1 Key Insight

All these concepts converge into one central idea:

Finance studies financial instruments and how they are used to move resources across time under uncertainty.

4. Financial Instruments: A Precise Definition

4.1 What Is a Financial Instrument?

A financial instrument is:

An intangible asset whose value derives from a contract.

Key properties:

Examples:

4.2 Asset vs Liability

Every financial instrument is:

This dual nature is fundamental to understanding financial markets.

5. Who Operates in Financial Markets?

5.1 Traders vs Brokers

5.2 Regulation and Supervision

Financial markets are regulated, not anarchic.

Key institutions mentioned:

Regulation exists to:

6. Finance, Risk, and Return

6.1 Why Do Investors Invest?

Because they expect a return.

But return has a cost:

Risk

This leads to the fundamental trade-off:

6.2 Equity as the “Cinderella” Asset

Equity was introduced as:

Yet equity is essential:

7. Finance Is About the Future

A central theme of the session:

Finance is about the future.

Key clarifications:

Finance is therefore:

8. Core Principles of Finance (Reinforced)

The foundational principles were repeated and reinforced:

  1. Investors prefer more to less
  2. Investors are risk-averse
  3. Money paid in the future is worth less than money today
  4. Markets tend toward efficiency
  5. Arbitrage opportunities attract competition

Mistakes and inefficiencies:

9. Time Value of Money (Revisited)

Even though the session was declared “formula-free”, one formula was intentionally repeated:

9.1 Present Value Formula

PV = FV / (1 + r)^t

Interpretation:

This formula will appear throughout the entire course.

10. Bonds (First Structured Introduction)

10.1 What Is a Bond?

A bond is:

10.2 Pricing Bonds

Bond prices are calculated as:

Types introduced:

Bonds belong to fixed income markets:

11. Equity (Stocks)

11.1 What Does a Stock Represent?

11.2 Valuing Equity

Stock valuation requires:

This connects equity valuation directly to:

12. Derivatives (Conceptual Overview)

12.1 What Is a Derivative?

A derivative is:

A financial instrument whose value depends on another asset
(the underlying asset)

Examples:

Key ideas:

All derivatives are priced using:

Present value of future cash flows

13. Primary vs Secondary Markets

13.1 Primary Market

13.2 Secondary Market

Purpose:

14. Technology and Market Dynamics

14.1 Automation and Flash Events

Technology plays a central role in modern finance.

15. Final Messages to Students

The sooner you start “hearing the music”,
the sooner finance will start making sense.

16. Next Session

Traducción

21 de enero de 2026, 5:04p.m.

1 h 13 min 52 s

But did you, did you see the transcript that I share with you? There is no need to see the transcript. I just want to mention two or three things regarding transcript.
Because.
OK.
Uh, OK.
OK.
Goodbye.
Hey.
Let me see. I don’t remember. I think I have Sir.
Next day, whatever you can take here.
That is the second class. This one is empty and here you can find the summary.
And then?
Summary of the class and the whole text. Yeah, this regarding these goals.
There is no point in having the transcript. I am doing just because I have already started. I enjoy it. It’s just a walk through.
It’s just a breakthrough. Sorry, it’s, you know, I enjoy just playing with Google Notebook. I will go into Google Notebook. I will go into that.
And and we will see and also the transcripts are a way of managing information and we will see during the whole course of finance. We thought we saw it, we saw it. Finance has to do with the future.
Finance has to do with trying to understand what is going to happen in the future and in this sense.
Information is the most important tool we have in order to focus or to manage or to help. Yes, we will talk about all these things.
We will talk about all these things. Let me just go quick for principles and adults, the time value of money and producing.
I talk about money. Today we will review. We will talk about almost same things. Today we will talk about almost same things.
Oh, AI will be used.
Yes, later, not today. I will talk more about transcripts, about Google, not Google M, but I insist. Not today. OK.
What are we going to do today? Today we will continue with last day class regarding ADS.
Complainants has to do with
Finance. I told you, finance is a long case.
One is what? What is one of the objectives of this course? You’re getting used to this language.
As I talk about bonds, they will continue talking about bonds and we will be talking about bonds for almost the whole course.
Last day we introduced a lot of concepts. Don’t worry because we will, we will repeat. We will be going step by step. At the same time I will repeat same things again and again and again. Yes.
I want to start with the answer a quick quickly. I want each one of you. I’m going to say time and you shoot me.
Two. Why two? Because I’m going to ask.
And you say one of the words you were thinking about, you say the.
I want you to. I’m going to start with you guys and I will continue probably because we are few people. I will go to that. Yes, finance and you say it won’t go. Money. Perfect. Money is normally money.
The store, OK.
Market. Perfect. Market.
This next OK, this next I will.
But.
Thanks, yes.
Thanks.
Complicated. Now what did you say this? Business. Complicate. Complicate. Yeah, trading, trading, trading, trading, trading, trading. I’m looking for. I’m not going to stop till you say one of.
Security OK, securities come here. Securities saving, saving, saving or.
Or investors saving. Why do investors invest?
Because they have.
Well, OK, once comes here.
Once.
Loans, loans.
What about accounting? Accounting. I will write accounting here, but all these things, all these things has to do with security. Once you say one security.
I’m writing the security here, yes. What is the financial instrument? What is the security?
Is that nothing?
What do you mean?
I’m not, yeah, I mean before the.
Can you give me examples of expendable assets?
But bonds are financially, other intangible assets that are not financially.
OK.
But ownership of equity equity is a financial. It’s a security. I want intangible assets. Thanks. Patent is an intellectual property. Why is a patent? Why do you secure?
The work of people that has been doing research make sense.
Another example of everyone in here. Perfect. Another example of.
Why Coke is worthy?
And they wear same suit as from.
But this is expensive. No. Can it have same car? No, I mean the beast is the beast. A plane is expensive. Same shoes are expensive. What is the cheapest way?
You feel like that photo.
Like the president of the US, the cheapest way to feel like to do the same thing that he will do, the same thing he will say, pineapple. You just pay one euro and you will go over it and you feel like it’s the same coke.
Makes sense. Let me add another think of another intent you go ask. Let me try to say sorry for what I’m going to say. Sorry.
Yeah.
So happy. We are. Ohh
I was guessing me. It’s the only time in the whole course that I will be seeing you and I was guessing you. Makarena. It’s the worst way. Everything just can go better from this point, yeah.
It’s amazing that you have to take the worst. Time to compete. What is your name? Divan. Divan. Divan. I know that because my name is Garcia. Garcia. Garcia. Whatever. Nice to meet you.
I I’m talking about.
If I say finance, say one word. OK, market is here. Money’s here. I have go through everyone and I have written all this and I was saying that all this money stocks.
Our financial instrument and I’m going to financial instrument. What is a financial instrument? And I said that it’s an ask for the owner at least an intangible ask. I said that you can not touch.
And do you know Macarena?
Have you heard? Yeah, I heard. Sure. What is the point of Macarena? The Rio, the two brothers, the world, the so has earned more than 72 million because of the so.
What I’m talking about? Intellectual property, a brand software. Where does the value of all these kind of financial instruments came from? From different parts, in all cases from, let me say, outside.
This in the case of a financial instrument, where does the value pay from?
From the contract, the financial instrument represents itself.
Make sense?
What is a financial instrument? It’s an intangible asset that derives value because of our contract quality.
Very good.
You were not you, but you were saying you said investors, savings, banks. I was also looking, not looking for, but there are points that people say traders, brokers. What is the difference between a trader or a broker?
You are warm, you look for in 30, the warming. Traders can do all things, brokers can do and also.
Traders can. Brokers cannot. I need to buy stock. I call a broker. The broker will act on my behalf. A trader also cannot on their own behalf.
I’m just introducing today there won’t be formulas. Last day we went through some concepts.
For adjustment.
You say sorry. Why did you say sorry?
But you don’t need to say sorry. I am yes, yes, yes, sorry, sorry to be.
Here.
I have. Are you in? Yes. Perfect. I have bright space. I mean what I’m going to show you the other day when I introduced her for this in the like even like that.
The other day.
When I mentioned this, I said OPC over the government.
Out of the regulated system right space is under NYU regulate. This is OPC taking the power waste and if you just look here in the group info you will say.
You will see one link. You press this link and here you will find transcript from last class. I am recording all things that I’m saying and.
Welcome. Here you’ve got the transcript and all the things are OTC. OTC is a word that I said. I have to repeat and we will see later.
Securities, financial instruments, then people working.
Traders, bloggers, people, people, people, SEC.
If you see.
If I say SEC.
yeah Who are they?
Policemen. You want to operate. If you want to make public your company and IPO process, you need SDC authorization, yes.
Hey, FCC.
And also.
Well, well, provides back.
Markets are being provided by FCC Banking business is being supervised by and if I say.
Which name you should say?
You say the name, you are activate.
Yes, yes, yes, yes, yes. I wasn’t sure if anything. I have. I haven’t heard here the videos last day. We saw one video from Jerome Powell and the answer back from Mr. Trump in Denver.
They Tuesday and Wednesday, yesterday, one day ago, one week ago. Federal Reserve, Federal Reserve supervised banks and also Federal Reserve is in charge of monetary policy.
It is our policy government on the tele policy. What do they do? They bring money. But also next Wednesday, Dirham Powell will talk about money teleport.
And everyone, the whole war will stop, will happen. I think at 7:00 or at eight. I don’t remember at eight. Eight is Spanish time. At eight is Spanish time. The whole war will stop. We win. We will go.
Not today, probably next next day, not not now, because now no. All in market, all in market and see what are the pools. Fair check people working, yes.
And then a column team mats also also regulation is really important. Nobody has said anything where in regulation there is no problem but.
What is finance about?
Why are you here? Here.
The new year.
Speaker.
If I say return finance.
Yeah.
Now we don’t profit on the same side. I want to go to the other side. How do you pay return? What is the price you should pay?
You hear me? No. Risk. Risk return.
Read.
And return Greece and the holy training. That’s not holy, sorry, the training. No, I don’t want any. I’m Catholic. I don’t want anyone to get offended, but but.
Equity, equity, equity. Have you have our Cinderella?
Busy stairs.
Which one was? I don’t know if talking about Cinderella is only PC or correct. I’m saying that Cinderella. I don’t know if he was the dirty Cinderella, the dirty or the ugly who everyone talks about. We don’t. We don’t. Who? Who is Cinderella?
Equity. We will talk a little bit more about equity. Yes, return, risk and equity. What is this about?
It’s about the future.
This is about the future. When are you going to get this return? In the future. What does risk mean? I don’t know what’s going to happen. Uncertainty and equity is how do you connect return? And if you want to serve, you will need to find someone to serve if you.
Liquidity is like language, yes, liquidity is at the end. White people die thinking in financial terms because of liquidity.
You run out of money at the end. You run out of money. You need money. You need you going to a now you go to the.
Yeah, we’re going to a language, but please, I know, whatever.
Future. All of you are with me more or less. What is finance about? Finance has to do in the future.
And a really important question. Yeah, important.
That’s it. We talk about beautiful work. We talk about.
You have the whole classic, but most important thing from that class that I said at the beginning, and I don’t care to repeat, I ask everyone at the beginning of the class if they have, if they have called, they have called a mammal data.
I’d say that what I’m going to the video is important and then I family is much more important.
Sorry for this interruption, but I don’t care if it would be things that are important, but can we predict the future?
Oh, sorry for doing this. I feel like in Spanish we would say.
But of nervous means.
Like try a new.
And.
We predict the future.
This is the this is the cable, not myself and we predict the future.
Yes.
No.
Can we pay the future?
So like maybe.
Yes, Sir. I’m with because it’s quick. Quick. I have this here. Yeah. Oh, don’t go. This one. No, it’s secret. It’s secret. So.
Oh.
No.
So, so I’m gonna.
Oh, I don’t know who is this one. I don’t care. Whatever. Can we play in the future? Let me go quick to YouTube a quick video.
Mhm.
The video is in France.
The video is in France.
Oh, sorry, it’s becoming complicated.
My my Spanish is worse than my English.
He’s asking, are you a fortune teller?
Can you play the picture?
You understood the idea. Violence is bad. Sorry, sorry, I should have written a disclaimer. You are going to see violence.
Oh, I like the one hour.
Did you got the idea? Can we pay the future? No, but we cannot predict the future, but.
We can manage. We can manage. We cannot predict it, but we can manage. What is planning is about trying to managing unpredictable future.
We will all these things we are going to talk about. We will see you in the course step by step without any problem. Oh.
Anyone have one more?
I had. I’m thinking, think I’m I’m going where?
We are going to go through concepts that we will we will review all. And I want you to start hearing the music from the beginning. And the more, the sooner you hear the music, the more you will get familiar in the music.
Yep.
Or simple idea. We saw this idea last day. Let’s not prefer more than less.
I would prefer if you pay me over, I will be more happy if you pay me if you are buying.
You will want to pay the less amount of money. The higher the discount, the better. You are fine. You are selling just the other. Make sense.
Investors are riskable.
At equal circumstances, equal circumstances if you can choose.
One scenario without uncertainty, everyone will prefer. Therefore, because we will see that there are different risk profiles. I said understand we will go different then money paid in the future worth less.
Worthless money paid in the future. Worthless.
Today.
It was written that there won’t be formulas, but I’m going to write in the blackboard on the blackboard.
Present value is equal to future value over 1 + R rise to B. Yes, how much does 110 euros been paid in one year time worth today at a 10% rate?
Hello.
I put 100 in the bank in one year time I will get 110 and in two years time I would have I would have 100 + 1 + 10 + 1 from the other thing, so 121 makes sense.
And financial markets are competitive.
Be competitive, are efficient, and be efficient means that no artificial support.
This is correct. This is correct. This is correct.
Careful, we’ve been going. Careful, we’ve been going.
And this one is a trend markets then to efficient. What is the idea of saying that no arbitrage is possible? There is always arbitrage. Do all of us have same information?
No.
What happens when there is a lack of information? What happens if I make a mistake? So if I make a mistake, two things could happen for three you detect it or not in case you detect that I have made a mistake.
You can correct me or not in case you correct me.
And you detect and mistake and you correct. In this scenario you will get two things. One hand you will get extra credit from me because you have correct me, but also you are making the class.
You are making the class better. When I make a mistake, do I I am perfect or I’m a disaster? Are you perfect or are you a disaster? This is not the correct question, which is the correct question. The correct question is what happens.
When you make a mistake, what happens when you make a mistake? You learn, and by learning you become better. Make sense?
We will talk, but the idea is not that markets are efficient or not or markets efficient. The the the the the idea is that once there is an inefficiency, they won and there comes the competition.
Once someone detect inefficiency, one that detected will get a profit at the same time that.
Working for the market with the market better. Make sense? Yeah. OK, let me go quick. Yes, basically we will. Oh, I have talked about assets.
Here if you press this, if you press this, oh, I didn’t press it.
I didn’t press it, but here you have public physical attempt regarding financial assets. Here what it goes.
I am not pressing anything.
I am not here. Oh, I don’t want to press.
I am not. I have not pressed. Sorry.
I’m going to press now I have press because it has gone through all the quick list, all the quick list by itself, OK.
Hey.
No, no, no.
Yeah.
Oh, I wanna play. I wanna play.
Why? I am not a person. There’s a poker. You know what is a poker race? A 100 plus 10 years, 10 years ago.
One person was still here and I don’t remember if he was he or she that she didn’t like to match this is like in particular and because of that she.
OK, yeah.
I don’t know. It continues. It continues.
It continues. I can teach without the snides, but I want to press this link here.
OK.
I’m gonna.
Because I want also to share.
You do.
Yes.
I don’t know why it’s inside here.
OK, what is this about?
It’s a square worth 100 million. Yes, this is from year 2022, but what I want you just to have.
I’m Grisha, yes.
Hey.
War of sport teams, cryptocurrency, GDP of Ukraine compared with Russia. Yes, military spending since year since year 2022 military spending has increased a lot but.
Currency, physical coins and notes, yes.
What? What this?
So that’s what the the what is more.
This is money. This is money.
But careful because there are other things to do as money because they are holding. But it is money without any doubt, yes, but then we will see that central bank create money and also there is money in the system. Yes, because banks keep loans.
They take the posing and it multiply.
Let me hear.
Or solution for me is this central bank balance?
Central bank balancing the asset of central bank and the central bank balancing match with the money issued by central bank. Make sense the assets match with liabilities.
And it match with all the money not printed issue because printed is physically and also you can give money to banks.
Then SP500.
This is year 2022. Why do I know that this is all who is missing there?
A big elephant in the room.
No, no, no.
That typically is a open AI company. It’s not public yet. During this year, probably we will see seven IPO.
We will see Anthropy that one. We will see open AI. We will see probably SpaceX and there are seven or more.
Nvidia, Nvidia is missing there and Nvidia award 4 million, 957, Magnifica 7, Magnifica 7.
I said, I said it probably. Magnification. Magnification. That is Google.
Apple.
These seven companies worth 30% of SP500. I’m not sure if 30% is correct, but they worth a lot, a lot, a lot. And in terms of growth, SP500 is maximum because of this focus.
What I’m saying with this idea that technology matters. Yes, technology matters here.
US GDP, China GDP, Global money supply. What is peace?
Central Balance sheet. Do you remember it? Plus the post sheets and loan.
Enhance, plus the profits will follow.
Then for long term deposits.
Stock markets, not just SP500 all stock markets, yes.
Global debt? Global debt is absolutely important. Who has it? Sorry for what I’m going to say. Sorry for what I’m going to say. Who has generated debt? Who is going to pay the debt?
I I’m not the one that I needed.
This is a big deal if I know it will make sense to stop the whole class.
I’m just saying that example.
We just understand that this this is a point that everyone put together in order to try to solve this problem, it would be a little bit better. And then there is also China, then there is also technology. The world is so great that there is an issue with them.
How much is USUSA debt 38 more than 38 billion. Sorry, three years in Spanish. A billion is a 3 million because of 38.
Three years. How much is USPPP around 27, I would bet 27 for you, yes.
Last 70 days.
Of 2025, let’s generate one more billion.
So not only there is high amount of public debt, but also it’s growing at a high speed. Make sense? Oh, here nobody said options.
Futures, swaps, and even we will dedicate the final part of this course to talk about.
This is dead. It was dead. We are the state. All your all of you have been speak with yourself. Yes, global wealth.
And the notional value and total amount of value trade by the. Make sense.
What I want you to see, several ideas. What is money? It depends. And derivatives are absolutely important because thanks we will talk about money. Can we pay in the future? Yes, no. On one hand, there are people that look for financing.
And also there are people that look for help.
I’m speculating. I want to run in this 0 sum game, but as in this 0 sum game I can speak whether or not because I have both an insurance. I have paid the premium of an insurance for example.
Make sense?
OK, tell me.
Yeah, financial.
As what is a financial instrument?
Contract.
A contract that the right contract that makes the financial equipment work. Again, careful because it’s not an asset itself, a contract between two parties or one of the parties.
For the owner of the contract, it’s Amazon, but for the issuer, it’s Ali Avenue.
OK.
Here it is. Every financial security is an asset for somebody and the ability for somebody else. Why?
Why it is into?
No, no.
Quotation. Why is in quotation?
Because if I’m talking about the bond or other, I’m talking about stocks.
Our.
Yeah.
Are you everything?
Somebody can demand you for something. The case of a stop is not a proper demand because it’s a piece of ownership. You are the holder.
You are the shareholder. You have the right opportunity.
Hey, OK.
Use of financial instruments.
Eddie. Hi, Nancy.
Edit and finance. On one hand, I need money. I issue. I give you a vote. You give me money. I will make more money than the money that I should pay you back. I will pay you back and I will get also money because I have duty finance in order to finance my job.
Items, yes.
Financing and also.
Financial system. There are people that have savings. There are people that have financial needs. All of that, all of that. Everyone has me and also everyone has something to offer.
Probably I will need.
Someone that clean, someone to clean my room. In case I have saving you know, I can buy time.
But everyone has savings and financial and in this same time to financial improvement we can at the end allocate resources.
Allocate interest only. You have time, you need money, what you will do? What?
And you will.
Invest your time.
Anybody working and also.
You have much more than what you need of whatever.
Thanks to financial instrument, you can sell make money and with this money you can do other things. Imagine that you have much more oil and the oil you need.
You came from New York and the rest of you from New York? No, I don’t care.
I mean, I don’t care because I know I will not be a different treatment, but I want to understand. Yeah, make sense. Let me continue.
OK.
I will introduce three different types of financial assets.
I will start with bones. I will start with bones. I think I have.
This is more or less. This is last semester.
This is this semester. I don’t want to meet last semester with this semester, but I’m looking for I have a ball.
Yes, Sir.
OK.
We like my webpage, the words.
Who raised the war in Spanish that I don’.
What is?
I need money now and what I’m gonna do.
I need for example.

  1. If I need 100, I will love you 100 and I will give you back. I will give you one of these and this what you’re going. Please be entitled, you better one year time.
    Five. And in two years time, face value plus the comfortable. Make sense?
    This is a bone.
    I said 100, but also imagine that you don’t trust me.
    We.
    You don’t trust me and you don’t want to pay me 100, but I would say there. Thank you. Thank you.
    You don’t sleep right me or you don’t at the end.
    Yeah, sure. At the end there will be someone that will give you money. If you buy this has a face value of 100.
    Or 90 we are buying this with this code. Make sense.
    I’m going this. I don’t want to sleep anymore.
    here.
    Last day I introduce one absolutely from my point of view, crazy, incredible. I I talk about 5.
    Following. Yes, right. Following. I introduce a movie in the studio. Yeah, you know it. It’s like a curse. Yes. Have you tried?
    Oh yeah, but very little. I’m not. OK, because I’m not going out. I did it last day. I am the the reason. I’m gonna the reason.
    The reason I have I have create this my work page.
    Why? Because of because of this, because of this, and because of Google Studio AI that if we get in I3 because of the worries, can be out of this, all right.
    Yeah. So, yes, this is great. Oh, let me just.
    Yes. Where were you? Hey.
    See.
    Chatty. OK, the point is that you will see resources.
    You will see resources growing last day. I just have two of them. I am teaching in other universities and.
    I have done this one.
    You can. Don’t need to explain this.
    I did this today.
    The other day I did something in class. It was successful, but I did it the other day because it has no sense. What I asked is that happened. We will do things like this like.
    And then I will put it here. But what is this?
    A phone simulator face value 100.
    Open rate file. Here you’ve got.
    One is that is 100, so at the end you will receive 105 and here you will receive 55555. How will you calculate the price of a model?
    With present value formula present value of each one of.
    It’s one of the future gas flows, yes.
    What is a bond? This is a bond with coupons. Can a bond exist without coupons? Yes, and we will call it 0 coupon bond. And how do you calculate the price of a 0 coupon bond?
    By doing present value of future and growth with that formula, that formula is the formulator to complete present value of a zero.
    Hey.
    Yeah.
    We said.
    Yesterday I was teaching other students and the example that I gave was the number. I will come back here.
    In one, two plus in three pluses, I will come here. What is the point with all these things?
    Oh, we have got one problem, but I cannot see.
    Is what I mean now? Oh, OK, take over.
    I cannot see this one. That’s what I’m saying.
    That I have one minute.
    I have one need. I want to explain something with one figure, with one image. I just go into Google Studio AI. I just prompted.
    I’m going. I would pay this because I discovered this at the end of last semester and I tell that I need some something infrastructure in order to upload all these things.
    And back space.
    It’s fine, but it’s not mine. I cannot.
    manipulate it and with this I feel absolutely comfortable. And also I can be proud of having the Savvier what they keep the whole interval. That is correct? Yes.
    Fixed income. What is a bond? Fixed income markets are markets where bonds are different. Talking about fixed income and talking about bonds is talking about sales. Why bonds?
    Are called fixed income because if you wait in maturity you will receive fixed payment. Careful because the only thing fixed with fixed income are the payment if you need to sell it.
    Before maturity, the price can change a lot and depending on what power will say next Wednesday. Sorry, this Wednesday.
    I don’t know. In seven days. In seven days time, it’s next week. Yeah. Yeah. OK. In seven days time, depending on what power we’ll say, seven days time.
    OK. How how we will calculate price of bonds with time value bonds, we will delegate.
    Next week classes, the exercise that you have just received, all of you have received upload in Brightspace also and on the front first page you can see to be delivered through.
    We can have that program upload linked into.
    There are lots of different types of bond, but careful the more complicated something is.
    The list is the great.
    The more complicated, the harder to break. You understand what I mean?
    The more standardized the financial instrument is, the more.
    And.
    Imagine that I am sitting in Europe. I’m trading with a fixing goal.
    I don’t care. If it is Spanish, Italian, I just have money and I want to invest in the Mediterranians. Hope all public debt all over the world is or is it great? Thank you.
    All.
    Public modes are standardized, but because in the sense it’s easy to create. All of you have been in an international airport, more than one whole all international airport are.
    No matter in which part of the world you are, all international airports are the same.
    You see the area?
    Why? You have one finger, you have one dog, one you just hey, hey, excuse me.
    You didn’t have fix you.
    Let’s go.
    Financing instruments tend to be because there is someone financially and the way in order to buy answer quick is standard standardization. Make sense.
    OK.
    Any questions regarding things to come?
    If you own a stock, if you own a stock, you are you own a piece of owners. You own a piece of ownership in a firm.
    Did you own a stock?
    Why people buy stocks in financial debt? Because if you want to buy a stock, you can control it or you can control it. Make sense? And in terms of finance, why people buy stocks?
    Anyone can think that stock can grow, but why stock will grow? In order to keep, pay dividends.
    Companies always look for growing in order to pay dividends or not growing but paying dividends. Companies always stops, always pay dividends.
    Anyone is.
    I say companies always pay, be paid and for both me.
    Who are you thinking about?
    OK, there are times that if I say this, there are people that say, oh, Warren Buffet except Hathaway has never paid it yet.
    And it’s true. There’s other ways, a company that invests money for the shareholders and you can sell the shares if you want.
    And the point is that they are growing and now it’s they are liquid abnormally.
    How do you?
    Calculate the price of a stock or do you calculate value of a stock?
    The other day when we talk about value and price, two different things and we saw that we say that market price and value can.
    How we will calculate value of the stock? We will need to forecast future dividends, future cash loans. Have you heard about this yet?
    This here we want to work with investment banking. This here is modernization. This here is complete.
    So we see it. It’s talking cash flow, because flow is another thing that it’s talking cash flow. Make sense. I believe in person value feature.
    Everything has to do with that form, everything and.
    We what do we what do we do? Family money, admin money, family. I’m considering that as time class money will work a little bit. Make sense.
    Hey.
    How we will calculate price of entity, we will forecast dividends, we will calculate present value and discounting rate.
    Here we will make, we will make some adjustments regarding this. OK.
    And.
    Derivative. What is a derivative? It’s a financial instrument whose price derives from another a second financial instrument. What is the name of this second financial instrument underlying us or underlying me underlying?
    Derivative careful because there could be also commodity. The second financial instrument can be not a financial instrument itself, but the contract of buying oil. We are buying futures of oil.
    And we only tell people their life, yes.
    What is the idea of this underlying asset that I cannot know?
    the value of the financial instrument of the derivative itself, we don’t know the value of the
    An option for we will. I will explain all this future. What is a future? Instead of buying something today, you buy it in the future, but the price is determined today. Yes, what is an option instead of?
    Buy. You buy. Yes, the right to buy. In order to buy the right to buy, you pay a preview this.
    An option, a call option. I have both. You’re right. Goodbye.
    This a call option is buying the right to buy.
    A option buying a poop is buying the right to shop. Don’t get crazy. I am just saying things that we will review in the near future, yes.
    What is the price of a call option?
    I need to know first when is the time should happen.
    Yeah.
    Securities whose cash flow depends on values of other assets, samples, options, futures, what is a swap?
    We manufacture bananas. We manufacture beer.
    We agree in the future you will give me a certain amount of tears or sorry bananas and I will give you a certain amount of tears. We can do the same with euros. You give me euros in the future and I give you dollar or.
    It’s great and I give you a clothing rate. Is that good? What is this? This is a swap. What is a swap? The future? Oh, we will calculate value of all these things by calculating.
    Present value of future capital. What are we going to do during the whole course and connecting present value of future? Yes.
    I’m on.
    Praise, buddy. Praise, buddy. What are their minds? The price?
    But I am the manager and this place and the same thing.
    Bottle of water. What do you call this? Bottle of water? No. A bottle of water. Full bottle of water. In case this would be full of water now.
    Worth something because I have. I can feel it if I were in the visa.
    Probably it would work much more for me and I would pay much more, but if I were in the middle of today, so without this I would.
    He will go work that matters my life because in order to I will pay whatever make sense if work the value is lower.
    You have something and you told me it work for me not. I mean, I’m going to give it because I will give you good water, but I didn’t have any problem. So you told me, Luis, I will pay you $10 for this.
    But I will do.
    On the other hand, I choose.
    Please $300.00 for your shoes.
    Probably, I will say, and I will ask Garvey. I will give 200 for him.
    But I cannot be without truth now because my I’m in NYU. I can be able to in another university where I work.
    Are you sure Soniah PT.
    Do you understand what I’m saying? No, at the end is I married off.
    Racing.
    Pricing value market supply and the bond at the end. I saw I told you the other day so quick what we have to prices for people will start by the one for people will start.
    Selling a more expensive one and a lot of people buying will make the price go up and a lot of people selling will make the price go down. So in equilibrium at the end they will do just one price for me much more important than knowing this mechanism.
    Today is here in the name of the mechanism. The name of the mechanism is Arvika.
    Are we? Yes.
    I feel as if I were more time there than here. Sorry for being more time there than here.
    In the room that, yeah, David.
    I am the one that issued this.
    How much? How much you will pay me?
    How did you? OK, George, I imagine that you need money now. You thought that you don’t need money in one year time, but you need the money now. What can you do with this? You can reset it the first time.
    I introduced this in the market. These were a stop the IP outro. First time it’s called primary market.
    Then second time or third or 4th investor, investor called secondary market in this sense, in this sense.
    NASDAQ, NASDAQ.
    Uh, New York.
    These are markets where financial, the IPO takes place in the market and secondly primary markets or new securities flow.
    Normal. Normally government securities are actually actually in the Treasury webpage. You can go, you can Google Treasury webpage and then you can buy T-bones for the short term ones, for T-bills for the short term ones and T-bones for the longer term normally.
    T heals adds your performbo, that are involved and we stop. We don’t have bound to make sense.
    What I’m saying wars, wars, wars. Next day we will continue saying, yeah.
    Hey.
    Primary market and once an financial instrument is being sold. First time investor that has voted can research. This is the secondary market brokers. A broker, yes.
    OK, conclusion. Conclusion. We have started talking today about all these things. There is one mentioned there to class classes.
    What is a flash class? Have you heard of flash classes?
    Computer. Great.
    There are times that people, people going to buy and also computers can go in to buy. There are computers, a lot of computers at the same time want to buy, they want to sell and there are stop losses that turn on in case when the price is going down.
    And we can have spectacular things, talking about class classes today, ABS conclusion, what we have seen today.
    And we get from plastic and we have. I have started singing the melon. Yes, I have talked about fixing, I have talked about equity, I have talked about delivery and I have told you that they won’t.
    They were, they were not going to be any formulas and I have, yes, written value formula. Next day I will work a little bit with Excel. Next day we will start with exercises and please.
    Don’t get to sleep and start working. Yeah, well.
    Yeah, we’ll finish at 6:20. If I finish for me 30, you don’t have before.
    Yeah. Any questions?
    Yeah.
    Oh, yes, one one thing. I know that everyone is here. This is my I want to practice all day.
    It will be next day because I think I have lost.
    What are the system?
    It’s I for one of you class.
    Done. Sorry for not for that, but that you can remember that yes.
    Yeah. All right. Eva, Eva, Eva, Eva, Eva, Eva. This new debate.
    Yes, yes. And if you don’t mind, I will wait until. Can you write your name there? But we.
    Yeah, I have also. Thank you. Thank you. And I’m going to start practicing now.

Luis Garvía Vega ha detenido la transcripción