Derivatives: Financial Markets, Law and Policy

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

This course will review the workings of derivative instruments in the capital markets and how such 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.  While not highly technical, the 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 distress such as the Eurozone crisis and the US debt ceiling controversy), the history of attempts to regulate these instruments, and the current regulatory structure.

Required Coursework

The 3-credit graded requirements for the course will be:

  1. A thirty-page paper, to be submitted by Friday, April 14 2016 (80%); the opportunity for JD writing credit will be given to the first five students who present research proposals, approved by me, commit to completing their drafts by Wednesday March 9 for grading and comments by me, and submit their final drafts in response to comments by last day of classes (when all papers will be due).
  2. An individual class presentation, of 15 minutes in length (10%), on the early draft of the 3-credit paper; and
  3. Overall class participation (10%).The course will be highly interactive and graded on this basis.

The course will be highly interactive and graded on this basis.

Enrollment Prerequisite

To enroll in the course, a student must have completed or be concurrently registered in either Big Bank Regulation or Securities Regulation.

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