Session 1
Course Overview
Technology has undeniably changed how financial markets and institutions function. Every part of the financial value chain is being “disrupted” by nimble technology-based innovators. The payment system is digital, currency is electronic and investment advisors are being replaced by algorithms. Where one-on-one relationships used to determine success and failure, the ability to process and act on massive amounts of data is taking over. Securities trading and origination typically the turf of large institutions is being taken over by technology. Not only has technology impacted finance – innovations like indexing and fee-based advisors are fast changing the market for advice. Social Media has changed the landscape and speed of information dissemination. High frequency and algorithmic trading take advantage of fast access to information and technology to trade in milliseconds. Technology and financial innovations can be used for good or not so good purposes. For instance, it can be used to exploit behavioral biases such as underweighting catastrophic events - think of the financial crisis!
The course will study both the good and bad, regulatory aspects, and whether or not these innovations are exploiting or supporting “social welfare”. All of these aspects are changing the skills required to be successful in modern finance. We will also cover how finance has changed and is changing, the skills required to be successful and what the future may bring. Where possible we will link new phenomena to classical finance theory and highlight where predictions and reality have diverged.
Learning Objectives and Methods
The course is designed to present students with an alternate lens on finance, particularly financial markets, trading and investing, by extending the theoretical models and lessons of classical finance. This course will provide a fresh view on what may change and what may not. The class will revisit classic economic theories, how they may be changing, and potentially new economic theories and results. Innovations in trading including, high frequency and algorithmic trading, automated markets, and market speed bumps will be examined from a market welfare perspective.
The course will be delivered in a novel fashion with a combination of recorded lecture snippets, live tutorials, readings, presentations, and activities that will require the active participation of students. The course will depend heavily on active group participation and a desire to think outside of the box. Programming skills are not required but an openness to acquire these skills is a prerequisite. At the end of the course students will have knowledge of how technology supported innovation in financial services is changing financial intermediation. Students may also have an idea and a prototype for a FinTech start-up of their own. This is encouraged but is certainly not the only goal of the course.
Course Materials
Recommended Material
Subscription to the Wall Street Journal and/or the Financial Times. Some other excellent financial magazines such as The Economist and Business Week also provide good applications of what you will learn in the class.
Course Website
The course website provides valuable information related to the course. On the website you will find:
- Smith Living Cases
- Readings
- Video Snippets
- Academic articles
- Posted articles from financial press, as may arise in class
Evaluation
This class will be delivered in-part asynchronously. That means that students will work through some material on their own. The final course deliverable is a data assignment.
- Class Discussion / Forum Participation (Individual) - 10%
- Attack of the Robo-Advisors Case Write-up (Individual) - 20%
- Knight/ Robinhood Case Presentation (Group) - (2*10%) 20%
- Market Data Analysis (Individual) - 20%
- Final Prototype / Pitch / Report (Group) - 30%
Due Dates
- Market Data Analysis assignment – April 9th
- Attack of the Robo-Advisors case write-up – April 1st
- Final Report / Pitch / Prototype – April 9th
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