Derivatives: Financial Markets, Law and Policy

Modern capital and financial markets rely on a wide variety of complex instruments, including Treasury securities, debt and equity instruments, and derivatives of various kinds.  Public awareness regarding these instruments has grown since the Financial Crisis of 2008 because they were seen to have played an important role in both the rapid growth of financial markets (“financialization”) and their destabilization.  Such instruments and the role they play in modern markets remain little understood, yet some basic understanding has become important in modern financial law practice and discussions on financial policy.

This course will review the workings of the capital markets and how financial instruments themselves are used.  The relationship between banking and capital markets, and between government and the private markets, will be explored, as will the most important legal and fiduciary responsibilities involved.  Various principal types of government securities and derivatives will be examined.

Warren Buffet once called derivatives “weapons of mass financial destruction.”  We will consider the numerous public policy issues relating to derivatives, their role in the Crisis of 2008 (and more recent financial crises), the history of attempts to regulate these instruments, and the current regulatory framework.

Required Coursework

The course will be graded and will likely include both a written research paper component and a short exam (2 hours).

Required Text

Course reading materials will be supplied by the Professor.

Please note that course organization and content may vary substantially from semester to semester and descriptions are not necessarily professor specific. Please contact the instructor directly if you have particular course-related questions.

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