Welcome back, you should have a pretty complete picture now of how financial markets operate, but let’s put that into some perspective, let’s see how these markets hang together in a global context. Just as we've seen corporations going global, multinationals, so did the markets, first domestic markets opened up, became accessible to foreign borrowers, foreign investors. Then these markets considered options of going offshore themselves, by linking up with various overseas markets through joint ventures, mergers, but also through cross listings of assets. And then clearing houses started to realize that there were opportunities to pooling these risks, remember risk diversification, even more widely in a global context. So that has been mostly beneficial to corporations worldwide. But the public started to observe some major concerns. Tipping points for the public probably including the following. Unchecked misbehaving corporations utilizing these global markets, and of course the rogue trader examples that we've seen. Then there was risk pollution, keep in mind that markets are there to deal with risks. But what the public started to observe was that that risk was no longer the risk that corporations are facing in trying to sell off to speculators, but speculators creating new risks for their own benefits. That in turn led to significant contagion risk, for one market affecting other markets. And perhaps even worse, the absolute tipping point for the public in their perception of global capital markets was a series of externally caused financial crisis. So, what exactly is the problem here? What's the problem with global capital markets? Is it the globalization involved, the crossing of borders? Well, let's first come up with a definition of what globalization of capital markets is all about. It involves increasing global synchronization, the moving together of asset prices and volatilities, combined at the same time, with the rising market liquidity and transparency risks. Some of those risks we've discussed earlier in those course. All of that, the synchronization combined with increased risk, could amplify the impacts of shocks that, thus far, had only been constrained or restricted to domestic markets. Now more and more markets started affecting each other and potentially caused market stress. So what are the problems underpinning globalization? First, we still have a very limited understanding of global linkages. How these markets are really fitting together. How does spillover of volatility, of risk, how does contagion of risks across borders, across markets really occur? What is driving it, what is causing it? Second problem we identify, is our patent inability to actually forecast market failure. Market failure always comes as a surprise. In hindsight, analysts are always able to predict market failure, but unfortunately they're unable to put their finger on leading indicators. And lastly on the list of problems, we identify regulation. Regulation not keeping up with the globalization of markets. Not being able to cross borders. One particular event we will pay close attention to in this module, is the global financial crisis. In 2008 the global financial crisis started. And it has been blamed on the financial system at large, including markets, including institutions, and market participants. It's been blamed on the financial system, with individual small business and corporations being the direct victims. And the public at large, because of the recessions that were caused by the global financial crisis as collateral damage. So some of the questions we’ll address in this module, was this new? Is there something different from previous financial crisis? How did it happen? What caused the onset of the financial crisis? Were the markets involved? Are the markets to blame? Were there any long term damages that need repair? And lastly, what has been done since 2008 to avoid the next major global financial crisis? No discussion of global capital markets would be complete without touching on the latest developments in those capital markets. Disruptive technologies transformed capital markets since the 1990's or so, resulting in global reach and interconnectedness of those markets. The contagion and spill over risks that we will discuss later. Online and automated trading platforms appear everywhere. Mobile phones allow you to directly access most of these retail global capital markets. High frequency trading, algorithmic trading, new trading technologies that have only become available in the last ten years or so causing some of this risk pollution that I've just alluded to. Integrated markets like equity debt, foreign exchange, and commodity markets, all available within a single screen for large corporations. So much facilitating their transactions that involve each of those assets. New markets emerging, like markets for energy assets, or emissions trading. And lastly, the development and the emergence of informal capital markets. And shadow banking, something we'll also briefly discuss. It's worth noting that all these developments partly responded to changes in regulation, trying to evade regulation in some cases, or being able to deal with regulation. It's interesting to note that regulation itself, struggles to keep up with these developments.