Lecture, three hours; discussion, one hour. Requisites: courses 11, 101, 102. Enforced corequisite: course 106ML. Application of analytical tools of economics and finance to real-world problems in financial markets to link models students have learned in prior courses to patterns observed in financial markets and to understand when it is that further theoretical refinements are required to better account for certain observed patterns. Development of understanding of potential effects of monetary and regulatory policies on financial markets. Topics include bond market, stock market, foreign exchange market, financial crises, and financial regulation. Analysis and discussion of lessons of subprime crisis and European sovereign debt crisis. P/NP or letter grading.