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Student Recap — Oct 27, 2025

Admin & logistics

What we covered

Quick self-check (do these)

  1. Write one paragraph mapping who supervises what (CB vs market authority) and why interbank & sovereign secondary matter for policy.

  2. Define M0 vs M2 and explain how QE and QT affect each.

  3. In one line each: credit, liquidity, market risk for a bank (use the ATM/bank-run example for liquidity).

  4. Two projects have identical totals, but Project A pays earlier—which has higher IRR and why?

  5. Use modified duration to approximate the % price change for a +50 bp shock on a bond you price.

If you can do those cleanly, you’re on track for the final block (banks & regulation).

Transcription

27 de octubre de 2025, 8:06a.m.

Yeah.
Yeah.
OK, I have. I have corrected.
I correct the exams. I have correct the exams. Then this case on one hand, on another hand they.
Then we will start talking about tax.
Today we will start.
Let me share with you.
I’m sleepy.
Sleepy. These are the ones.
OK, so let me share with you these lights.
Do you see the calendar?
OK.
You see the calendar or is the calendar? Here is the calendar.
Monday the 3rd and the 10th we don’t have class is bank holidays is we.
This is.
This day that was off that is moved to the to Monday and this is this is a of November it’s not I don’t know if national or municipality but this holiday and it’s moving to the then we have class 5th.
What?
7th 19th.
I.
24th and we are close to the end.
I didn’t expect this deal flies, whatever. Some of you have asked me how much the midterm goes regarding final grade, yes.
Yeah.
In the syllabus is written I think that 30% but is not true because it depends. I will do it for you. Testing is not cumulative for Jupiter. Yes it is.
I mean, you understand what I mean. Depending I will choose the best.
The best point for you. So if here for example you have get a 6 / 10.
And in the final you’ve got an 8-9, final grade will be 8 or 9, but you should do it. Make sense.
And also all of you should know.
How to calculate the price of a bond and what is the ratio and how does this impact what happen? I mean all of you should know what happens when interest rate changes and also we will see, I will go quick today to markets or through banks.
Next day, next week I will, I will go also through markets. We will take, we will talk a little bit about derivatives.
And we will be down. I will try to finish as soon as possible with all things you should know. What you should know how financial system works, which part financial system is divided in two and.
Details, comprehension regarding each one of the parts and each one of the instruments. Then also you should know what is a takeover, what is an APO, what is primary market, what is secondary market. We have gone through most of the concepts. I don’t care to repeat and repeat and repeat.
Yeah. Any questions?
OK, uh, what else then?
I not only care about my slides, also let me see if I have report.
Yeah.
We are not going to see in class.
What repo?
It stands for. Anyone knows what is a repo? What do you call this in English? Repo. Repo. Yeah, you know what is a repo? Anyone?
What is there we interfere from the central vacuum? EC.
It’s almost like it’s like almost lending money within the I mean when talking about repo is the same as when talking about legal. There are two things at the same time on one hand, a repo.
It’s a short, really short term credit rate. If I am a bank, I have public debt. I’m a bank, I have public debt. I need liquidity in a short term. I can sell the debt with a repo agreement.
That this means that I’m going to buy in one week time, yes. So a repo is a quickly way in order to get finance in the short term, but also is a reference for interest rates. I’m not going to ask what is a repo in the final.
But if you look repo rate that is a reference, you will see that it’s almost zero. That is really.
Short. What does this indicate? This indicate that the market is dry. Market is dry.
Margaret is right.
But everyone, do you remember the other day we were talking about AI and we we were talking about. I didn’t mention in this way, I think, but.
We were talking about something that is crazy and I told you that there were crazy valuations regarding Nvidia regarding.
What I want you to feel now, I want to share one feeling. This feeling is personal. I’m not going to ask this in the final, yes, but what I want you to see or to feel at least.
That there are not just one elephant in the room. There are more than two or three elephants in the room. What are the names of these elephants? One is SP500 in maximum, but just because of.
Three companies, well, first elephant.
Is there a bubble in AI?
Absolutely, yes. And it’s not a bubble. It’s one of the mother. I’m talking about 4 trillion. We’re talking about Nvidia evaluation. And if you see what Nvidia is doing with open A I, what are they doing? They are lending money one to each other without lending money. Oh, you give me one.
100 billion. I will give you 100 billion in chips and we continue making the bubble bigger. Yes, also always federal government in the US.
Who is the federal government in the US? Anyone.
Are you aware of what I’m saying? Always federal government in the US?
No one.
Government sat down hits day 26 with no deal insight.
Is this the name of another elephant of the one we have in the room?
Does this mean something?
Some of you are U.S. citizens, no?
Always. Oh, my friend Valerie. Valerie. Always French government now.
Similar illness. In Spain, we don’t still know that we have this same illness. In Germany, they know that they have this illness. You understand what I mean, but I’m trying to trust me.
I don’t know what I’m trying to transmit, but I feel that.
Repo market is dry. There is a financial.
Situation regarding money fiscal policy, yes. Then we have a media, we have all a I companies that are burning liquidity and they represent a bubble.
Yeah.
What if this bubble burst?
Who’s going to Who’s gonna print money in order to bail out AI?
Federal Reserve is not in their mandate. It’s not in their mandate.
Can Federal Reserve bring money? Absolutely, yes. What has happened this night, yesterday in Argentina? Elections. Midterm elections. What has happened? That the Millay has won.
Why? Because the US has given me, has given them money. Lula also has received a bailout in dollars. You understand what I’m saying? What I’m saying is that on one hand, there is Federal Reserve.
On the other hand, what do we have? AI and all these companies who were evaluated? Let me go and just in order to finish M0M0.
I’ve already showed you this monetary base here. Let me come here soon.
What as Federal Reserve is trying to do since February 2024, Federal Reserve is trying to.
One quantitative is happening. He’s trying to take money out.
So what I what I want you to see on one hand, there is a shutdown in the government. Government needs money. On another hand, there is a bubble that needs money in order to continue growing. I’m talking about AI also.
Federal Reserve is trying to take money out, yes.
SP500 is in maximums. Bitcoin is maximum. Gold is in maximum.
What is my feeling?
That.
It is a big, big, big, big.
Issue. I don’t want to say bubble because I don’t have the crystal ball, but the situation is not nice. Yep. Have you heard about 2008 crisis?
How many times in class someone has told you about 2008 crisis? Several times, no.
What I want you to feel or what I want to transmit you, but I feel as if we were in 2007.
My feeling is as if we were in 2007.
Excents you see all indicators.
Let me look.
Anyone knows what is big?
This is implied volatility index. It’s taken from options, from derivatives, yes. What people consider what people trading derivatives consider is now the volatility of the markets.
And did you see there was a peak here? When was this peak?
When they sat down start now, now they sat down to start. Yes, 16 of October. No, this is 2 weeks ago. I don’t know why this peak is there.
This has to do with Ukraine war, 8th of April. No, this wasn’t a.
This was Deepseek. Elections were 20th of January. Here Trump was elected. This was Deepseek and I don’t know this one what is about, but it has to do with something regarding geopolitical things.
Then let me move one year. This is the one that we have just seen.
The pandemic here in the pandemic there was another peak and here there was the 2008 crisis. One important thing this peak 24th of October, yes.
This indicator. This indicator doesn’t tell you the crisis crisis is about to happen. This indicator shows you when the crisis has already happened.
Make sense? Don’t try to foresee the future here.
Here is once crisis has happened, yes.
This is the pandemic, twenty of March, where all of us were twenty of March.
You know what I’m talking about? Yep.
What is going to happen?
I don’t know that.
There are several problems. Where was Trump yesterday?
Where is he going? Where? Where he is in China. He’s now in China.
What we think he will get from there. Personally, I think that he will get peace regarding that is probably we will see how the water gets cold, yes.
SB500.
Personally, I don’t know what is going to happen.
And what I’m trying to say, I’m not saying you should be afraid. What I’m saying is that there are things that makes me feel nervous. Yes, people, let me see the new course.
Somehow inverted.
That nothing new, nothing that we haven’t seen before. OK, so this goes somewhere.
Today I want to talk about KP institutions. Let me first give you the.
You will see one number here in pencil. What does this number mean? This is just at least number for me to order the exercises. This is the first.
I don’t go on. You have #1 because you are the first in the list. This does not mean anything else. I want you to give me back. We will go through the exams. You will have the exam, but I I want you to give me back the exam. Yes.
Abigail.
OK.
It.
Alice there. Alice. Alice there. OK. Amy Tule. Amy Arianne Rising.
Ugly meats.
Eight, eight or eight. That is, eight or eight.
Aton Charlie Gato.
Gonor.
Dustin Greenwood.
Dilan Gorman.
Elisa Eva Castello.
Yes.
Frederick Luis, Gabriella Media.
Gordon Stewart, Gordy.
Awardee Grace Morgan.
From James Leslie, James.
In a hurries, in a hurries.
You me son.
He said.
Well, they.
Logan. Logan.
Natalia.
Noah.
Really big.
Really.
Broly stay.
Robbie.
Simon Padres, Sophie Brown.
Of your own Talia.

  1. Victor Jenson Welcome Ariel.
    Thank Martin. Thank Danny.
    I’ve seen her, Danny. Oh.
    So announced.
    You have a basic, Councillor, Councillor, that’s the matter.
    Or anyone have a question? Yeah, don’t worry.
    Hey, hey.
    Let me let we’re going to go through this. We are going to go through this and.
    Some of some of you have had with this, something work.
    It worked. I mean, I really appreciate whatever. Let me go through this and we will see and you are going to have. I have already told you you have. I mean we are going to go through this. You will correct with me.
    And you will see you have you have extra grade regarding this exercise. But then later of course I know who you are and I will give you extra grade for almost everything, but probably you already have extra grade.
    I I mean, I I don’t remember about that far.
    I have given exactly well almost all questions, but let me go through this because I know you are.
    You are. You care about the grade, and I care about you knowing two or three things. And in this trade-off we will find a point, yes.
    In which parts financial system is divided into into about supervisor financial? No, look at me. In which parts the financial system is divided into?
    Thinking about supervisors.
    Yes, yes, I’m.
    All of you have heard that. So in this case I I, I mean, I’m not asking for really, really, really complicated things. All things that I have asked are things that I have reviewed in class more than.
    Five times at least, at least, and I want all of you to know it.
    And personally, I don’t care too much about grade and once you are answering so fast and in this way.
    You will get extra grade and extra points and and I don’t really care. Do you understand what I mean? The point is that I have correct this exercise without reading my notes, yes.
    This is just a number and this a number and I don’t care. I mean some of you have done exercise also you have had participation but now more or less I can see correlation, correlation.
    Be doing.
    Some of you I can see correlation between some of you that attending class.
    And I can see the relations and now, for example, I’m more more worried regarding some of you that I think that you attend, but not too much. I will repeat things more, but this is just a way in order me to know you. You understand the point.
    And some of you, there are a few of these, but some of you I thought that personally once I had correct them without looking names, but once I give you back the exercises.
    I’ve seen people that I thought that, oh, I would say that they don’t have whatever. What I mean is that I am.
    Connecting.
    What you have in front of you is of David and we are going to go through this then.
    If you are sitting in next and you take and you take notes when I’m talking and I ask you things and you have sure be back. Personally, I think that you are.
    More connected with the class than someone that probably is now. I’m not. I’m talking about the statistics. It’s probably that there is someone looking in the Internet by speakers.
    Is it possible someone in class buying sneakers at the same time that the teacher is talking?
    Whatever. I don’t really care too much. I care about justice, but if I say the word justice, I know that it’s impossible to be justice and private. OK, supervision of the interbank market.
    What is it? Let me start with a question. Short question one, yes.
    Third question one, I have gone in class through this a lot of times and this is what I have just asked you. Financial system is divided into three parts, banks, markets.
    And insurance.
    Insurance. I don’t care too much. Yes, insurance. I don’t care too much, but we’re talking about markets and banks. I care a lot, yes.
    Question one is who supervise it? Medic markets, SEC and then Federal Reserve.
    It depends. I mean, it depends on your country. I don’t really care what names you have written here, but what is that?
    A central.
    Bank.
    Central bank, central banks, central banks are being are the supervisors of the banking system and also central banks are in charge of monetary policy.
    A monetary policy objective has to do with inflation. And how do you control inflation through interest rates? Make sense? Then SEC. What happens in the markets? Financial instruments are in trade.
    By whom? By traders, brokers that are. I mean, if I want to buy stocks, I go to a broker or I go to a trader and traders can buy for themselves and then also investment funds are here.
    Before going somewhere else, that’s fair. That’s central banks supervise any markets.
    Yes, they do. And they supervise 2 markets, two markets that has to do with monetary policy.
    Two markets that has to do with monetary policy. What is the name of these two bankets being supervised by banks, interbank, interbank market and also?
    Secondary market of public debt. Why? Because from here we get in Europe a river.
    And from here we get the yil koof. What is the river and the yil koof?
    Indicators for interest rates. Why these two markets are being supervised by central bank? Because they have to do with monetary policy. There are two markets that has to do with monetary policy and the two markets are being supervised by them. Make sense.
    Cool.
    Also, does ACC supervise banks?
    Just in case they work.
    Ask.
    Financial intermediaries. If you ask your bank, I want to buy stocks, you call your bank, you ask your bank to call to buy stocks. They are acting as a trader or as a broker and in this trader.
    Banks are being supervised by SEC. Makes sense.
    This is something that we have gone in class through this more than five times. The day before, first day of class, the 2nd, the 3rd and the 4th. And in the slides you have this scheme. On the slides you have this scheme and when we went through this scheme in class, I told you this is important.
    And this is going to be asked in the meter.
    So once you see this, let me go to the first question. The supervision of interbank market is competence of interbank. Why? Because this has to do with monetary policy.
    Yes.
    Second question, does the market supervisor have any competence regarding banks and saving banks?
    Yes, if they give investment services, yes.
    With these two questions, what you can do also?
    You can read these questions right down in question #1 and you are killing two birds with the same shot with all respect to birds. You see what I mean?
    These two questions and the other one is the same.
    Then let me continue.
    Cash circulating in public plus commercial banks reserves in accounts with the central bank are.
    Let me come here.
    I I didn’t mean it.
    I need a minute. What is this graph that I have just showed you?
    The monetary base.
    Why is it monetary days?
    M0 monetary basis cash circulating in the public plus commercial banks reserves in accounts with the central bank. Yes, then.
    M1 and M2 if you have the monetary by base, short term and long term deposits, you’ve got the money supply. Money supply is M2. What is money supply? The amount of money that.
    Ranks into the system. What is monetary base, the money printed by central bank?
    Let me go to question 6.
    I’m question nine. Yes, I’m talking about the test. Then I will go to the others. Yes, question six. After 2008 central banks increased and zero to quantitative easy at road money and to view.
    Roll this. Why?
    What I’m saying is after 2008 crisis, after 2008 crisis, monetary base grow.
    This increases, yes.
    And this didn’t increase.
    At the same speed, and thanks to this, the system didn’t have inflation on that moment. From that crisis moment, there was not inflation.
    Why banks reduce lending and the money multiplier failed? It’s question A. What is the money multiplier? The relationship between M0 and M2 or M0 and M1? Inflation was too high. It’s not true.
    And fiscal policy offsets monetary policy. This means nothing. Question 6 is just continuing with this idea and let me move to question 9, yes.
    Quantitative easing refers to large scale assets purchased by central bank. How many times did I repeat this and that I was going to talk about and ask about quantitative easing?
    Let me go to short question three. What is quantitative efficiency and how does it differ from quantitative? Explain their impact on the monetization and money supply. You see combining question, test question.
    Question. Question 369.
    You have a lot of things to say regarding sort of question three, yes, but normally what have all of probably most of you have got all the credit.
    In question, in short question 1-2 and three, yes, when did when didn’t I give you all the credit? In question, short question one, if you don’t know that the market is divided into 3 parts, banks, market, short insurance.
    Or there has been people that has said told me that.
    A super, but I have read a lot of things. I have read a lot of things. If you have gone, if you have the birds a lot, a lot, a lot, probably I have given you half point over one.
    I have tried to be generous regarding regarding that. Yes. OK, let me come back to question four, question four and five has to do with the VC market hypothesis. We went in class.
    Rubies.
    Saying that the market is efficient is the same as saying that no arbitrage is possible. Saying that the market is efficient is the same as saying that no arbitrage is possible, yes.
    So what does arbitrage mean? Getting again without assuming a risk, without assuming a risk?
    Then at which level of the efficient market hypothesis is technical analysis considered inefficient?
    Technical analysis has to do with trying to predict the future by looking historical prices.
    It refers to the week 4, but if the market is efficient in the week form.
    It will always be efficient in the semi strong and in the strong. So the correct question is D.
    This question is tricky. This question is tricky. I recognize, but probably is the only one where you can tell me this is a tricky question. It’s just one.
    Then a.
    As Federal Reserve mandates, Federal Reserves mandate differs from ECB because Fed target inflation and unemployment. I have said this more than 10 times or 20.
    Don’t know, but I have to repeat this idea a lot. What is ECB mandate? ECB mandate has to do with inflation. Yes, inflation.
    Federal Reserve mandate is a dual mandate.
    OK, what’s your name?
    I understand that question 8 is hard to read. It’s hard to read, but let me read it with you. You are analysing 2 investment projects. The only difference between 2 projects is that project one.
    The only difference one and two, two investment projects. I invest 100, I invest 100. The only difference.
    Between the two project is that project one is expected to receive larger cash flows early in the life of the project, while project two is expected to receive larger cash flows late in the life of the project, yes.
    Here I will have 110 within a year and here I will have.
    110 within two years, yes.
    Which statement is true?
    Project one IRR is bigger than project two. Project two IRR is bigger than project one. Project one IRR is equal depending on the discounting rate. Project one would be different than project two. We are talking about IRR nothing.
    Depends on the discounting rate because that is the discounting rate.
    And then the question is, who has a higher IRA?
    Yes.
    No one higher higher that only different is that project one is expected to receive later.
    I roll deep.
    This is project one, this is project two and who have hired Ayada this project because received the cash flows earlier. The sooner the the sooner you receive the money, the more the return you will get. Make sense.
    I.
    Which of the following is not an example of fiscal policy? What is fiscal policy about?
    Government expenditure, public administration expenditure and taxes. You take taxes and you have public spending. This is fiscal policy, yes. On the other, on the other hand, there is monetary policy. Monetary policy has to do with.
    Increasing and decreasing interest rates.
    Which of the following is not an example of fiscal policy? Raising interest rates. OK, question one, we have talk. Question three, we have talk.
    Why do we say that inflation is not only a price increase, but also a loss of trust? Illustrate your answer with one example from history or present monetary policy.
    OK, in most of cases I have given you in this question full credit.
    Why? Because I don’t want to argue, I don’t want to fight, and I don’t care to be.
    I mean, here we can fight, but let me just if you have mentioned Lehman Brothers crisis, it should be bad because Lehman Brothers could be an example of a lot of things.
    But not a cause of inflation thanks to Federal Reserve reaction. Thanks to Federal Reserve reaction. There was no inflation because of that Bernanke received Nobel Prize and because of that, Yep.
    Hernanke didn’t receive Nobel Prize because of that that he received Nobel Prize and he was the chair of the Fed on that moment.
    So if you have say Lehman Brothers class is not correct.
    If you say pandemic by itself.
    It’s not. It’s not correct also, because the pandemic didn’t cause inflation by itself. The pandemic itself didn’t cause inflation.
    Inflation was caused or after the pandemic.
    Pandemic itself didn’t cause inflation. Why there was inflation due to the pandemic? Several reasons. One reason that I think nobody has mentioned it and if someone has mentioned it.
    Don’t care too much. During the pandemic, there were cuts in the supply chains. The supply chains all over the world were cut, were stopped. Yes, after the pandemic, when all of these supply chains.
    Start it again.
    There was inflation, temporary inflation because we all of us should reorganize the war again. So on one hand, pandemic cause didn’t cause inflation itself. Then second idea.
    In the US, money was given, checks, stimulus checks were given to U.S. citizens. This goes crazy. And in Europe we have war in Ukraine.
    This cost inflation from the offer side. If you give money to people, you are causing inflation from the sorry from the yeah from the demand part. If you are, if you have a war and energy prices goes up.
    You have inflation due to supply.
    Make sense?
    OK.
    OK. And in order to finish Silicon Valley’s Bank’s duration trap, first question.
    What is Durasia?
    If someone has asked, today is time. I have said that I was going to kill him or her. I haven’t done it. I haven’t done it. I have continued. I have continued reading and see what else was really there.
    What is duration interest rate sensitivity? But not only you need to write interest rate sensitivity, you also should understand what is interest rate sensitivity and is as simple as what happened with prices when interest rate changes. What happens with prices when interest rate?
    Yes.
    I said yes.
    And has a negative relationship. If interest rates increases, price will decrease. It’s just a simple formula. Present value is equal to future value over 1 + R rise to P, yes.
    If rate increases, price will decrease.
    All months. Duration is the answer. The bigger, the bigger the duration, the bigger the duration.
    The more the change, the more the change in prices when the rate changes. Make sense.
    Then what had happened with Silicon Valley Bank?
    Two things at the same time.
    Interest rates rise more than 400 basic points in less than one year.
    Interest rates increases and also their clients, their client need money today. An increase in interest rates cost that the long term bonds they have in their balance sheet.
    Lost part of their value.
    And more clients requiring liquidity in the short term made them to sell these bonds. So they have in short term a loss in their balance sheet around 30% because of all these bonds.
    That’s it. That is race increases, price decreases.
    And in this case, if you read the piece of news that I have said, it’s written.
    When interest rates rose sharply, the market value of those bonds plunged, creating large unrealized losses, yes.
    Any questions?
    I know that you are aware of.
    I want you to know 2-3 things.
    At the end.
    We have same objective through different ways, but what is my point? I think that all there is, there is a bias. Not all of you are here.
    Not everyone is here.
    You see what I mean? No, I I’m not blaming. I’m not putting the blame on someone. And what I’m saying is that all all of you that are here one Monday morning, probably has got.
    Better grading than these guys that are not here.
    Will it make sense to put the blame on you because of something that has to do with the people that are not here? No.
    You understand what I’m saying?
    What I’m saying is that I care about you to fully understand what I have just said. I’ve talked about monetary policy, I’ve talked about bonds, I’ve talked about the.
    Our financial system is divided in two and I’m going to start talking a little about banks. Yes, if you can hear and repeat same mistakes.
    Probably you will get.
    Any questions?
    If you don’t mind, I’m going to take the exercises.
    Thank you.
    Yes.
    Good.
    OK.
    Oh.
    OK.
    Regarding banks and banking system, I want I’m going to go. So not not quick.
    Is.
    What is the bank?
    Anyone?
    What is that?
    Great institution, but what makes different in the bank from something else?
    What is a bank? What makes a bank different from another financial institution?
    No, no.
    What can you do in a bank that you cannot do somewhere else?
    I thought.
    So I’m in order to do something funny.
    What do you want to say? Perfect. You said I was looking for that answer. Taking loans. Yes, taking loans.
    I’m happy with you saying that answer. What is the difference between daily loans and what you said?
    Deposits. Let me so quickly. I can give you loans. Everyone can give you loans. Amazon can give loans. Everyone can give loans. What makes a bank different? The facility of taking.
    Deposits. Deposits. If I say banks, you should say deposits. Deposit. What is a deposit?
    Giving that your money to someone.
    And the one that received the money doesn’t need to tell you what it’s gonna or what it’s gonna do with your money. You understand what I mean? Let me use a different example. In fact, how do I have Korean people here?
    How do you say taxi in Korea? If I say taxi in Korea, taxi drivers, we know where to go. Taxi, taxi, you say taxi.
    Yes, OK. In England. Oh, do you say tax tax?
    Taxi. Taxi.
    Mexico in Spain taxi.
    Several ideas, so quick ideas. I don’t want to spend too much time with taxes.
    And how do you say I’ve not been in Japan? Anyone have been have been in Japan or do they call taxis in Japan?
    Taxi. This is standardized. This is standard. John. John is not here today. If I say standardized, he should say equity. If you want, what is equity that I go in Korean? I don’t know a word regarding Korean, but I know a taxi I can distinguish.
    I will do this. Yes, Sir. I’m raising my hand this not.
    If I do this, this is an international sign for stopping a taxi. Hey taxi, is this international?
    You don’t need to know the language. You do this yesterday. No matter where you are, you go into the taxi. You tell the taxi driver you you want to go somewhere and you go. This is standard because this standard is liquid.
    I want a taxi.
    But in order to drive a taxi, you should think about municipality, no municipality.
    The town also, in order to drive the taxi, you need a license, a public license, same as a bank. In order to manage a bank, you need a license, isn’t it? In order to drive.
    A bank? You need a public license. Who give licenses? Who give licenses for taxis? Then they don’t. How? They don’t hold give you licenses for taxis. Who give license for banks?
    Yeah.
    Who is the one that gives license for bands?
    The European Central Bank, sorry, the central, the your central bank, if you want to become a tax in Korea or sorry, a tax if you want to become.
    A bank in the UK, in England, who which door will you know? Bank of England. Do we know Bank of England? I need a license, yes. If you own a taxi, what can you do?
    What? What is the service taxis do?
    Taking people from the street. Can you stop an Uber?
    No, you cannot. An Uber. You can call it through the Internet, but you cannot stop an Uber. Yes, the public service. This word is important when talking about banks and taxes.
    Public service given by banks. Public service given by taxis is a public service that is being given by a private.
    Go back.
    Make sense? Public service, private, open. All of you understand what is a public service.
    These worries being a public service is something important. And here I’m not talking about politics, I’m talking about something that is a standard and it works the same all over the world.
    If you go to an international airport, have you ever been in an international airport? Of course, yes. All of you have been in an international airport. All international airports are the same. Why, John?
    Because of liquidity, because of standardization, because life should be in these cases, I should always be.
    Or easy we got it. Do we complicate our lives?
    But not because international airports are complicated, not because taking a taxi is complicated, not because buying bonds is complicated. All bonds all over the world are the same. Bonds are the same with their coupons and they trade the same.
    Those stocks all over the world are same standard. I’m talking about the financial instrument. You take an Nvidia company or you take a utility company from China, both stocks.
    Will have same shape. Both stock will have same same taste. Both stocks will pay a dividend.
    And fiscal policy regarding both would be quite the same. Make sense.
    Any questions? So what is a bank? What is a bank? Deposits, deposits. And then also with this money that they take, they give loans and regarding all these loans that is have.
    Important product that that is called not only loans but also mortgage. What is a mortgage? All of you know what is? What is a mortgage? All of you know what is a mortgage.
    All of you know what is a mortgage.
    But it’s a mortgage, you know, but it is.
    It’s a loan. A mortgage is a loan, a normal loan, but we have a guarantee. And typically, not typically, sorry, what is the guarantee for the loan? A house? As simple as this. Normally you can make a loan.
    The guarantee will be yourself. You will be prosecuted that the loan. Sorry, the mortgage is a loan with a guarantee. Then what is a line of credit?
    What is a line of credit?
    I’m afraid this money.
    The bank in a loan. In a loan, the bank gives you money. You should pay back the money. Yes, this is a loan. When it’s a line of credit, the line of credit the bank let let you.
    Take the money from your credit and you don’t need to take all this money up front. You can take the money just in case you need it and you don’t. You are not forced to take all the money. A line of credit and a loan looks the same. You are taking money.
    But in the loan you are taking all the money up front in the line of credit. You are taking the money when you need it, yes. Also line of credits can be given to clients, to citizens.
    In the form of a card, a plastic card.
    OK, I I want to move quickly.
    Next Wednesday I will repeat this idea. Next Wednesday I will come back here.
    OK.
    This slide is absolutely important.
    This slide is absolutely important.
    What is finance about? What is finance about?
    What are you saying there’s about?
    Not yet, not exactly.
    Yeah.
    Tigers has to do it careful because.
    In soccer you were I I told the same thing to solve. I don’t know if because of that you were in front of the goalkeeper alone.
    And I have seen as the ball has gone, it has gone outside this.
    Future. Future is unpredictable. You said it’s like it’s predicting the future. You cannot predict the future unless you are a fortune teller. And personally, I don’t believe in fortune tellers, yes.
    You cannot predict the future. Finance. Finance has to do with an unpredictable, uncertain future. Yes. Can we predict the future? No.
    But can we manage? Yes. How do we call? What do we want in the future? Why you are here?
    Don’t say because of that you are here because.
    Why do you need a grape?
    And why do you want to graduate?
    And why would you want to get a job?
    Working busy.
    Successful success has personally success.
    We should be fine. I don’t want to go into success definition and at the end why we are here in order to make money. Sorry for saying this in the sense. Why have you wake up early in the morning? Why we work to make money? How do we call this in finance?
    We don’t.
    Return. And the higher the return, the higher the risk. Have you ever heard that? What is return? Can we get money easily? All of us want to get money. The more you study, probably the more.
    Only you will make, but is this enough?
    On one hand, there is return, also there is risk.
    When we are going to make money in the future, can we play the future? No. So return is uncertainty and risk is a synonym of uncertainty saying risk and saying I don’t know what will happen in the future stands for the same.
    And then, John, there is liquidity, return, risk and liquidity, return, risk and liquidity. Return is what we are looking for. Risk is what we face and liquidity has to do with how do we manage.
    How do we manage? Normally you can buy or you can sell. In theory, return on risk. In practice, when you want to buy, you should buy a sell. We do call it liquidity.
    So finances in practice is called liquidity, in theory return on risk.
    OK, but you were not really disconnected. I asked about what is finance and you say managing money.
    Managing money. What is money? We talk about money. We talk about how much money there is. What is money?
    Deposits, trading and unit of account. Can you eat money? No. But can you buy? Can you buy food with money? Yes. Can you do something with money itself?
    Just count or you can have.
    You can have bills and you can start doing like this. You can throw bills. Imagine that I came here with a bunch of money and I start throwing it. Will you start loving me?
    I came with a lot of money and I start throwing it to you. Will you start feeling love for me? Sorry for what I’m saying, but you understand what I’m saying.
    What is money? Money at the same time is nothing, at the same time is.
    Plump here for much more than making.
    I’m saying that that money at the same time that is nothing is everything probably is going too far. But you know what I’m talking about. Money is an intangible asset that by itself means nothing. But if someone give me now $1 million.
    I will feel happy. Depends on the reason. Depends on the reason. Because probably someone gives me $1 million more than happy. I will be afraid.
    I wouldn’t be afraid. Make sense.
    Probably my first reaction will be not taken.
    My first reaction will be not taking it, and if you think about it, you should agree with me, because probably if you are taking that without having more information, you will be ruining your life.
    And what I want to say, what is finance a certain?
    Finance has to do with risks. What is banking business about? We say deposits, but at the end, banking business has to do with managing money.
    So what is banking business about? You have said, and I agree with you, deposits. But let me let me tell you, please, all of you, I want your full attention from everyone.
    What is banking business about? Managing risks? Managing risks?
    You told me managing money. You were not talking about banks. You were talking about finance in general. But I’m talking about banks and banks has to do with taking deposits and lending money, but they manage money, but instead of saying managing.
    Money. Let me say managing risks. Why? Because when when a bank give you money, what the bank is giving you trust. Let’s see what that you are going to pay this money back in the future.
    Intense.
    What do we call money that you want? You won’t pay back the money. How do we call it?
    In case you don’t pay before and in case I am analyzing the possibility of you not paying.
    It’s a risk. How do we call this risk?
    Yes, yes, but in terms of banks.
    Credit risk. I mean, default risk is a great name, but we normally call it credit risk, credit risk. Then have you ever go to a?
    ATM All of you know what is an ATM International. All of you know what is an ATMATM is like taxi.
    ATM is like that. It’s an international. Have you gone to an ATM and have you read? Have you ever read out of service due to technical issues?
    95% of the cases it’s a lie. It works perfectly, but what is the problem?
    Why it say out of out of order because of technical issues? Why do we? Why do you need in order to drive a car? What do you need? Gasoline in order to drive an ATM? What do you need?
    Money inside. If an ATM ran out, having money stop inside an ATM, that’s a cost.
    As a cost, all of you understand it. If the ATM runs runs out of money.
    Will the ATM say, oh, I have run out of money?
    Imagine the bank has run out of money. What do you feel? Panic. And if you feel panic, you will lose your mind. You will run to the bank and you will start withdrawing all your money.
    Have you ever heard that? Do you know what I’m talking about? What I’m talking about? A bank run. A bank run. What is a bank run? Panic because the bank has run out of money. And how do we call it when talking about banking business?
    Liquidity risk. This is called liquidity risk.
    Liquidity risk makes sense.
    This is called liquidity risk. So I have talked about credit risk, liquidity risk.
    And let me think, talk about market risk. What is market risk for a bank? Anyone?
    Market risk.
    No one if you if you work in a grocery, what is market risk for a grocery?
    For a Grosse, Grosse inflation is still there, but inflation.
    For example, being so simple, being more simple, more simplistic price of oranges, the price of the oranges changes. This is market risk for a grocery.
    Simple to understand, if you work in an oil company or in a manager, if you work in an energy company, what is market risk?
    Electricity for on one hand, petrol on the other one. Make sense.
    If you work in a bank, what is market risk for a bank?
    If you work in a bank, what is market risk?
    You work in a grocery. You work in a bank.
    Absolute money.
    And regarding money, there would be interest rates. You, all of you, if I says interest rates, all of you should think about, for example, Silicon Valley Bank.
    If I say interest rates, all of you should think in an automatic way. Duration and also Silicon Valley Bank, yes, and also just interest rates.
    Forex, if you work in dollars, rate change with that. If you think about Forex, it’s also interest rates comparing your I’m talking about the current trade and in order to talk about current trade, you should look what ECB is doing if you are in dollars or what Bank of England is doing if you are trading with.
    Yeah, what I’m saying.
    But I’m saying credit next day we will continue with this, but I want today to start saying this because next day we will continue talking about this credit interest rates.
    Very liquidity and market. Very liquidity and market. Next day I will continue here.
    There are much more risk, liquidity, credit and market risk, then inside market risk, interest rate risk and forex, yes. And also there are reputational risks, social risks, operational risks.
    Operational risk is important and next day I will talk a lot, a lot and I will dedicate the whole class to talk about.
    Vasil regulation. Noah, where is Vasil?
    It is, Councillor. Where is Davos? Where is one of the Where is Bretton Goods? Bretton Goods is a hotel in the States.
    But what does Davos, Bretton Woods and Basser has in common? A ski. Next day we will go. But Basser regulation has Basser Juan Basser.
    Two and Basel 3 Basel one came from the 80s, Basel 2 came from 2004 and Basel 3 has to do with 2012. Next.
    Next Wednesday I will repeat, but I want you to hear this now. First time I’m doing a just absolutely quick overview of Bassel. Next day we will go. Bassel one has to do with credit.
    Risk Basel 2 has to do with great risk +2 ones more operational, operational and market. Why operational risk has to do with Basel 2?
    Because the 11th of September we leave. You weren’t born 2001, the 11th of September, but we leave an attack and this has to do with operational risk, yes. And then after 2008 crisis, basel 3 happens.
    These are agreements. I will explain what is bank for international settlements or next class and Basel three that is much, much, much more complex. Also talk about liquidity risk.
    And systematic, systematic risk. Yes, any questions? Next day I will explain this with detail, but today what I’m going to do, I’m going to serve this picture through WhatsApp.
    We are done.