Wednesday, July 18, 2007

Preparing for my international finance class

So, getting ready for my first international finance class at the University of Chile law school, tonight, here in Santiago. I've been reviewing notes and vocabulary - my desire is to do this in Spanish, which may be either a great idea or a terrible one. We shall see. High volatility experiment. There are a lot of finance terms that somehow didn't show up in the Spanish I learned in Peru as a Mormon missionary many decades ago - hedge fund, private equity, futures market, derivatives. Not in the Bible or the Book of Mormon, either. But I've mostly managed to locate the vocabulary for those terms - anyway, so many of them are either close cognates or else the word is borrowed from English ("swaps").

Oddly - since for most people speaking is harder than listening - my bigger problem is understanding what people are saying. Look, I never had this problem in Peru, or Colombia, or Madrid. But in Sevilla I couldn't understand 80% of it, which shocked me, and I am finding it somewhat problematic here in Santiago. Terminal syllables get dropped here, just like in Andalucia. It is more or less the way I speak English, I'm told - tends to dry up at the moment when you're about to hear it. So I am actually more concerned about being able to understand my students' questions and comments than I am being able to say things. My accent, let's face it, is atrocious. And I misuse and misapply many prepositions in ways that my wife wouldn't tolerate from her American high school students in spanish class. But I use the subjunctive pretty well - quite automatically, in fact. I can't use the vosotros form at all - just never studied it, except to read it, so I simply don't know the forms automatically. And one of the great shocks to me is the growth of the tu form - in Peru when I was learning Spanish in the mid-70s, it was all very formal. True, a professor would tutear the students, but would expect the formal from them, but I find that tough when trying to think about other things But things have really changed socially with respect to levels of formality - when I was in Spain in 2004 and used Ud., it was really as if I had insulted someone - as if they weren't good enough to be my friend.

The class for today is mostly very basic, but very essential finance concepts. The first hour is a review of the basic financial instruments and their internal legal and economic characteristics - stock, bonds, preferred stock, convertibles - also options, futures, swaps, and the concetps of a derivative instrument. It covers the fundamental economic characteristics of any financial instrument or, for that matter, any contract - the allocation of risk, return, control, and the cost of capital implied by the other three. The second hour discusses the issuance and underwriting of a security, stock specifically, in the primary market - how does underwriting work and who are the players? The third hour introduces the variety of international financial markets - capital markets, risk markets, etc., not so much as actual physical markets, but as functional markets that use the different financial instruments in different ways - eg, stock can be used as fundamentally capital raising but it can also, in other contexts, be used as an instrument in the market for control - or both at the same time.

It's cloudy and pretty cold today in Santiago - it's peculiar, one moment I'm reasonably warm and the next I'm chilled. I think it might have something do with the moisture in the air - after all, the temperature is in the 50s. I like Santiago, what bits I've seen of it, and tomorrow and Friday I plan to spend more time looking around. And I'll take a few pictures and post them.

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