Financial markets have become a central aspect of our daily lives due to deregulation and liberalization in national economies and financial and technological innovation in the last few decades. The amounts traded in financial markets daily, monthly, annually, are sometimes at par and sometimes much bigger than the GDPs of the five biggest economies in the world. The immense growth in financial markets affects our daily lives not only during times of crises but also on a daily basis because of their ups and downs. Monetary policy and financial markets are intrinsically linked. Central banks conduct monetary policy by directly and indirectly influencing financial market prices. Since financial market participants seek to extract profits from buying and selling securities, markets inevitably pay close attention to both words and deeds of central banks. The relationship between monetary policy and financial markets is by no means a one way street, however. Financial market prices reflect the expectations of market participants about future economic and monetary developments. These expectations, in turn, provide valuable information for central banks in determining the optimal future course of monetary policy. This book makes sophisticated concepts accessible, introducing students to how markets and institutions shape the global financial system and economic policy.