BF_003
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Banking Program
Financial Markets and Institutions
Syllabus, Texts and Study Programme
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Course Summary
An examination of the flow of funds in the economy and of the role
of financial intermediaries' leads on to discussion of the principal types of
financial institutions. The functions and responsibilities of central banks are
discussed, together with the mechanism through which commercial banking is
reviewed, with emphasis on the role of international commercial banks in the
Euromarkets. The role of investment banks and their services to their corporate
clients are studied, together with a look at the functions of private banks.
The course ends with a description of "derivative" instruments and
their uses.
This course will provide students with an understanding of today's
financial markets, instruments, and institutions. In addition, it also exposes
students to current developments in the financial system. Students will develop
a comprehension of the interesting interrelationships between and among the
various financial institutions, instruments, and markets. Students will also
recognize the essential relationship between risk and expected returns for many
financial instruments available to investors.
Course Objectives
The objectives of this course are to provide participants with an
overall understanding of the nature and functions of the most important financial
institutions and of the markets in which they operate. The types of institution
studied include central banks, commercial banks, investment banks,
international banks and private banks. Detailed studies are made of the money
markets, the term loan and syndicated credit markets, the bond markets - with
particular reference to Eurobonds - and the derivatives markets.
Expected Outcome / Learning
At the end of this course, students will know how investment
portfolios are created and evaluated. More specifically they will be able to:
- Understand the flow of
funds in the economy.
- Explain how financial
institutions are operated.
- Understand the
difference between the private banks and the services provided to them by the
investment banks.
- Examine the evolving
structure and role of financial markets and financial institutions in providing
financial intermediary services to the economy in the dynamic Information Age.
- Address various forms
of risks faced by financial intermediaries with an emphasis on the risk
management techniques available to managers of financial institutions like
commercial banks.
Prerequisites
Students must be familiar with the material covered in Accounting
and Capital Markets, including pro-forma statements and CAPM.
Required Textbook
Saunders, and Cornett, Financial Markets and Institutions – An
Introduction to the Risk Management Approach, McGraw-Hill International
Edition, third Edition.
Suggested Readings
Supplementary
readings will be provided in the reading assignments for each module.
Students must maintain the readings, discussion
participation, quizzes and assignments to obtain a passing grade in the course.
To obtain a superior grade, students must demonstrate a high degree of quality
in their work.
IMPORTANT
PLEASE NOTE THAT
PLAGIARISM (copying other writers' text without due citation or recognition)
WILL NOT BE TOLERATED. Plagiarism is equal to cheating in exams as it means
"stealing" solutions to problems, ideas or written text from other
people and pretending they are your own. Students caught committing these forms
of cheating will be subject to course failure and will be reported to the Dean
of the University. Two instances of cheating or plagiarism will be cause for
academic suspension.
For information on what
plagiarism is and how to avoid it, please read the pages 41 and 41 in the book:
TURABIAN, Kate L., A Manual for Writers of Research Papers, Theses, and
Dissertations, Chicago Style for Students and Researchers, 7th Edition,
The University of Chicago Press, 2007.
COURSE SCHEDULE
Module 1
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Description
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Introduction. This module introduced
student to some of the basic ideas in financial markets and institutions.
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Read
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1. Textbook, Chapters 1 and 2
2. Power point presentation of chapters 1 and 2.
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Prepare
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1. Participate with at least one response to the on-line
discussion that you send to all other students and the professor.
2. Be ready to
discuss: “What are the different theories explaining the term structure of
interest rates? How can forward rates of interest be derived from the term
structure of interest rates?”
3.
Short response to:
a.
Chapter 1 – Questions 1, 3, 5, 7 Pages, 24-25
b.
Chapter 2 - Questions 2, 4, 6, 8 Page 69
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Module 2
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Description
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Financial Markets. This modules describes major function, structure of financial
markets.
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Read
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1. Textbook, Chapters 4 and 5
2. Power point presentation of chapters 4 and 5
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Prepare
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1. Participate with at least one response to the on-line
discussion that you send to all other students and the professor.
2. Be ready to
discuss: “How do monetary policy changes affect key economic variables? How
do U. S. monetary policy initiatives affect foreign exchange rates? What have
been some of the recent challenges experienced by major central banks outside
of the United States?”
3. Short response to
a. Chapter 4 - Questions 1, 2, 3, 4 Page 139
b. Chapter 5 - Questions 5, 6, 7, 8, 9 and 11. Page 174
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Module 3
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Description
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Bond Market and Derivative securities markets. This module defines
bond markets, bond market securities, bond market participants and Eurobonds,
Foreign bond and Brady / sovereign bonds.
This module will explain the Derivative securities markets,
options and international aspects of derivative securities markets.
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Read
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Chapters 6 and 10
Power point presentation of chapters 6 and 10
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Prepare
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1. Participate with at least one response to the on-line
discussion that you send to all other students and the professor.
2. Be ready to
discuss: “An American firm has British pound-denominated accounts payable on
its balance sheet. Managers believe the exchange rate of British pounds to
U.S. dollars will depreciate before the accounts will be paid. What type of
currency swap should the firm enter?”
3. Short response to
a.
Chapter 6- Questions 1, 3, 5, 7 and 9. Page 211
b.
Chapter 10 - Questions 1, 3, 5, 7, 9 and 10. Page 345.
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Module 4
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Description
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Description: Commercial Banks. This module looked closely at commercial banks
as a sector of the financial institutions industry: definition, balance
sheets, size, structure and composition of the industry.
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Read
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Textbook, Chapters 11
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Prepare
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1. Participate with at least one response to the on-line
discussion that you send to all other students and the professor.
2. Be ready to
discuss: “Provide a brief summary and overview of the commercial banking
system from 1992 to 2004. What are the key characteristics and recent trends
in the commercial banking sector? Identify any current trends in the global
economy that may be impacting the global economy on an adverse level.”
3. Short response to
a. Chapter 11 - Questions 2, 4, 6, 8, 10. Page 372.
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Module 5
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Description
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Regulation of Commercial Banks. The module covers the major aspects of bank
regulation.
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Read
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Textbook, Chapter 13
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Prepare
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1. Participate with at least one response to the on-line
discussion that you send to all other students and the professor.
2. Be ready to discuss: “Identify and discuss the weaknesses of
the leverage ratio as a measure of capital adequacy.”
3. Short response to
a. Chapter 13 - Questions 3, 7, 13, 15. Page 432
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Module 6
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Description
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Other Financial Institution.
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Read
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Textbook, Chapter 16
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Prepare
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1. Participate with at least one response to the on-line
discussion that you send to all other students and the professor.
2. Be ready to discuss: “Explain the difference between the
investing and investment banking activities performed by securities firms and
investment banks”
3. Short response to
a. Chapter 16 - Questions 5, 11, 20, 22, 25. Page 521-522
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Module 7
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Description
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Description: Risk Management in Financial Institutions. This module will
examine types of risks incurred by financial institutions including, credit,
liquidity, interest, market, off-balance sheet foreign exchange risks.
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Read
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Textbook, Chapter 19.
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Prepare
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1. Participate with at least one response to the on-line
discussion that you send to all other students and the professor.
2. Be ready to discuss: “Suppose you purchase a 10-year
AAA-rated Swiss bond for par that is paying an annual coupon of 8 percent and
has a face value of 1,000 Swiss franc (SF). The spot rate is U.S. $0.66667
for SF1. At the end of the year, the bond is downgraded to AA and the yield
increases to 10 percent. In addition, the SF depreciates to U.S. $0.74074 for
SF1.
a) What is the loss or gain to a Swiss investor who holds this
bond for a year?
b) What is the loss or gain to a U. S. investor who holds this
bond for a year?.”
3. Short response to
b. Chapter 19 - Questions 2, 3, 4, 5, 6. Page 592
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Module 8
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Description
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Managing Risk with Derivative Securities. This module defines
ways of risk hedging with derivative securities.
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Read
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Textbook, Chapter 23.
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Prepare
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1. Short response to
a) Chapter 23 - Questions 3, 5, 15. Page 652-653
2. Final Exam
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