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CAPITAL
MARKETS: THEORY, MODELS AND CEE EXPERIENCE
5 - 16 July, 1999
Course Directors:
László Halpern (Institute of Economics, Hungarian Academy
of Sciences; CEU; and CEPR)
Gábor Kõrösi (Institute of Economics, Hungarian Academy
of Sciences; and CEU)
Resource Persons:
Wojciech W. Charemza (University of Leicester, Department of Economics)
Francesca Cornelli (London Business School, Institute of Finance; and CEPR)
Júlia Király (International Training Centre for Bankers;
and Budapest University of Economics)
Enrico C. Perotti (Amsterdam University, Department of Financial Management; and
CEU)
János Száz (Budapest University of Economics, Department
of Finance)
Andreas Wörgötter (Institute of Advanced Studies, Vienna University;
CEU; and CEPR);
Course objectives
All Central and Eastern European transforming
economies had to build up and develop capital markets from scratch. Different
countries chose different approaches, and the success of these institutions
is very variable. Similarly, the integration of these markets into the
global capital market brought very mixed results. It is important
to consolidate evidence on the experiences so far, confront it with the
theory, and draw conclusions on the possible paths of further development.
Additionally, the introduction of EMU will be an important challenge to
all CEE capital markets; we plan to discuss its consequences, possible
strategies of adaptation.
As the institutions of capital markets
were absent in these countries for decades, the development of the local
capital markets was—and in many countries still is—seriously hampered by
the lack of well-trained professionals. Universities throughout the region
need lecturers who can teach modern theories of the capital markets, are
familiar with the most important techniques and models routinely used on
developed capital markets.
The purpose of this course is two-fold:
To bring together experts of capital markets of the region to discuss
relevant issues, and to teach the modern theory and practice of operating
on capital markets. We hope that many participants of our course will be
junior faculty member in economics or finance departments, and they will
be able to use their knowledge in higher education. We intend to keep the
course at a good intermediate level: Assuming that participants are familiar
with basic notions, however, are not experts. We plan to give a general
overview of the issues, and then concentrate on a rather advanced discussion
of some specific problems.
Curriculum
The course will be composed of four
streams:
- Exchange rate theory and policy
in an open economy
The exchange rate is one of the most
important prices in a small open economy. In its first part, the course
deals with theoretical explanations of exchange rate developments, namely,
what are the assumptions and what are the main results. In the second part
different empirical issues will be dealt with: the choice of exchange rate
regimes, the role of exchange rate in currency crisis, the interest rate
and purchasing power parity problems. In the third part some countries
and regions will be discussed and analysed with the help of the analytical
tools presented in the previous parts: Mexico, Czech Republic, Israel,
Hungary, South East Asia.
- Risk management and portfolio analysis
The stream will cover the following
topics: derivative markets; risk; value at risk (VAR); pricing formulae;
portfolio analysis; risk management; regulation and capital controls: new
trends emerging with reference to value at risk systems. The stream will
be supplemented with case studies and a practical computer session.
- Econometric methods of analysing
financial time series
The stream will be organised in four
parts: linear models of stationary time series (ARMA models); the statistical
consequences of non-stationarity and unit root tests; trends and common
trends, and models of the variance (risk): ARCH—GARCH family. It will be
supplemented with a computer session, where the most important techniques
will be practised on a specific stock exchange index.
- Experiences of the CEE financial
markets
This stream will mostly consist of case
studies of individual CEE capital markets: organisation, regulation, efficiency,
integration into the global capital markets. Some important markets: for
example, the Russian, Czech, Hungarian and Polish ones will be analysed
in detail. There will also be comparative studies. The stream will be concluded
with a panel session discussing two major topics: CEE capital markets and
European integration, and efficiency and regulation.
Application requirements
Applicants should have reasonable background
in economics and financial mathematics. You should be familiar with Excel
and Winword and should have some general computer skills. You should provide
one of the following as part of your application: either (1) a paper (at
least a detailed outline) you would like to present during the SUN course,
or (2) a draft syllabus (course outline and reading list) for a class on
`Finance in Transition Economies’ or `Open Economy and Transition’.
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