This textbook covers financial systems and services, particularly focusing on present systems and future developments. Broken into three parts, Part One establishes the public institutional framework in which financial services are conducted, defines financial service systems, critically examines the link between finance, wealth and income inequality, and economic growth, challenges conventional paradigms about the raison d’être of financial institutions and markets, and considers the loss of US financial hegemony to emerging regional entities [BRICS]. Part Two focuses on financial innovation by explaining the impact of the following technologies: cryptography, FinTech, distributed ledger technology, and artificial intelligence. Part Three assesses to what extent financial innovation has disrupted legacy banking and the delivery of financial services, identifies the main obstacles to reconstructing the whole financial system based upon “first principles thinking”:
Nation State regulation and incumbent interests of multi-national companies, and provides a cursory description of how the pandemic of COVID-19 may establish a “new normal” for the financial services industry. Combining rigorous detail alongside exercises and PowerPoint slides for each chapter, this textbook helps finance students understand the wide breadth of financial systems and speculates the forthcoming developments in the industry.
Author(s): John JA Burke
Publisher: Palgrave Macmillan
Year: 2021
Language: English
Pages: 233
City: Cham
Contents
List of Figures
Part I: Financial Services: Public Framework and Relationship to Capital and Income
1: Introduction
Introduction
Bibliography
2: Essential History and Fundamental Purposes
Introduction
The United Nations
The International Court of Justice
The Bank of International Settlements
The Bretton Woods System and Institutions
The International Monetary Fund
The World Bank
The World Trade Organization
Conclusion
Questions for Students
Bibliography
3: The Financial System
Introduction
Mapping the UK Financial System
Conclusion
Questions
Bibliography
4: Capital in the Twenty-First Century
Introduction
Role of Financial Sector in Income Inequality
Conclusion
Questions
Appendix
Income Inequality in the US
Bibliography
Part II: The Conventional Paradigm: Questioned
5: The Conventional Narrative: Deconstructed
Introduction
The Flawed “Principal Conclusion”: Exceptions
Porter’s Competitive Advantage of Nations
Microfinance
Venture Capital
Non-finance Factors of Economic Growth
Overview and Data
Misuse of the Financial System
Conclusion
Questions
Appendix
Bibliography
6: Commercial Banks Create Money Out of Nothing
Introduction
Restraints on Money Creation
Seigniorage or Making Money from Money
Conclusion
Questions
Bibliography
7: Money
Introduction
The Sovereign Definition
The Metallic Definition
The Trust Definition
The Fiat Definition
The Electronic Definition
The Digital Definition
“Money as Energy Model”
The Rise of Digital Money: A Consolidated Construct and Taxonomy
Conclusion
Questions
Bibliography
Part III: Technologies Influencing Financial Services
8: The Genesis Files
Introduction
David Chaum
The “Non-private” Digital Signature Scheme
The Solution: “Blind Signatures” and “DigiCash”
The Mechanics of eCash
Adam Back
Nick Szabo
Wei Dai’s B-Money
Conclusion
Questions
Bibliography
9: Cryptography
Introduction
Historical Symmetric Ciphers
The Caesar Cipher
Modular Arithmetic: An Essential Detour
Modern Cryptography
Symmetric Key Encryption
Lester Hill
Claude E. Shannon
Horst Feistel
Architecture of Modern Cryptography
Symmetric Cryptography
Problem: Lack of Secure Key Exchange
The Diffie-Hellman-Merkle Key Exchange Scheme
Public Key Cryptography: Asymmetric Key
Digital Signatures
Hashes
Global System for Mobile
Conclusion
Questions
Bibliography
10: FinTech
Introduction
Financial Instability: The Norm
Financial Services: An Elitist Club
Payment Networks: A Study in Malfunction
Lending: The Universe of Multiple Monopolies
Mobile Phone Technology
Causes of FinTech Expansion
Definition
First Principles
Framework
Changing Financial Systems Architecture
Case Study in International Payments: TransferWise
Case Study: Starling Bank
Case Study: P2P Lending
Case Study: Ripple6
Structural Changes in the Financial Services Industry
Revenue Migration
Structural Changes in the Financial Services Industry
Conclusion
Questions
Use Case
Payment Systems
Bibliography
11: Distributed Ledger Technology
Introduction
The Cambridge Report
Essential Terminology
The Cambridge Framework
Actors Within the DLT System
Layer Interdependence
What Is Decentralisation?
Use Case: Bitcoin
Satoshi Nakamoto’s Problem and Solution
Application of Cambridge Report DLT Framework to Bitcoin
The Protocol Layer
The Network Layer
The Application Layer
Mechanics of the Bitcoin Network
The Coin
Architecture of the Bitcoin Blockchain
Mining Difficulty
Bitcoin Network: Vulnerability
Ethereum
Ethereum’s Proof of Work
Ethereum 2.0 (Serenity)
Hyperledger
Use Case: Bank Loan
Use Case: Supply Chain Management
Conclusion
Exercises 1: Merkle Trees
Exercise 2: Use Case for Hyperledger and/or Blockchain
Bibliography
12: Artificial Intelligence
Introduction
Machine Learning
Supervised Learning
Semi-supervised Learning
Unsupervised Learning
Reinforcement Learning
Deep Learning
Natural Language Processing
Applying AI to Markets: Algorithmic Trading
The Efficient Markets Hypothesis
Behavioural Finance: Flaw in the Efficient Market Hypothesis Theory
Automated Trading Strategies
Origin of Rules Trading
Introduction to Modelling: Algorithmic Trading
A Valid Model
Chatbots
Conclusion
Appendix
Fundamental Analysis
Technical Analysis
Questions
Bibliography
Useful Links
Popular Mechanics
Machine Learning (Towards Data Science)
Part IV: The Future of Financial Services
13: BRICS
Introduction
G7
G20
BRICS Inter Se
Conclusion
Questions
Appendix
Bibliography
14: Modern Monetary Policy
Introduction
The “Six” Pernicious Myths
The Real Crises and How They Are Managed
Conventional Monetary Policy
Causes of Inflation: Two Models
Modern Monetary Policy: Explained
Conclusion
Questions
Bibliography
15: Impact of FinTech: A Prediction
Introduction
The Dream Vision
The Reality
FinTech’s Landscape
Select FinTech Banks: Lack of Universality
The Future Bank: Planet Mars
Conclusion
Questions
Bibliography
16: Conclusion
Introduction
Bibliography
Index
