University of Parma
Department of Economics
Financial Area
INTERNATIONAL FINANCIAL
INSTITUTIONS AND MARKETS
PART 1
Federica Ielasi
2010 September 22
International Financial Institutions
and Markets
• The course is divided into two parts
• The first part of the course takes place from
today up to the end of October
• At the end of the course you will obtain a
single mark
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-2
Introduction
• My web page: “Facoltà di Economia”, “Didattica”,
“Docenti”, “Ielasi”
• Course timetable, course programme, book
references, notices, slides (after each lesson)
• Password: IBDFI2010
• My e-mail address: federica.ielasi@unipr.it
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-3
Timetable
• Tuesday 9:15 – 11
• Wednesday 9:15 – 11
• Thursday 14 – 15:45
• With a five-minutes break halfway through
the lesson
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-4
Office hours
• Tuesday 11 – 13
• Wednesday 11 – 13
• Central Building (Facoltà di Economia),
Third Floor, Mathematics Section
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-5
Lesson
Date
1
22 September
2
23 September
3
28 September
4
29 September
5
30 September
6
5 October
7
6 October
8
12 October
9
13 October
10
14 October
11
19 October
12
20 October
13
26 October
14
27 October
15
28 October
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-6
Course Preview
On the evening news you have just heard that the
bond market has been booming. What does this
mean? Do I care about interest rates? Will this
impact on my ability to get a bank loan? How
does my bank assess me? Is it better to invest
my money in stocks or bonds?
This course touches on a variety of topics, including
stock markets, bond markets and banks…
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-7
Why Study Financial Markets?
Financial markets, such as bond and stock
markets, are crucial to our economy.
1. These markets channel funds from savers
to investors, thereby promoting economic
efficiency.
2. Market activity affects personal wealth, the
behavior of business firms, and the
economy as a whole
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-8
Why Study Financial Institutions?
• We will also spend considerable time discussing
financial institutions—the corporations, organizations
that operate on financial markets.
• Banks and other financial institutions play a crucial
role in improving the efficiency of the economy.
• Financial institutions are among the largest
employers...
• Knowing how financial institutions are managed may
help you deal with them better.
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-9
Text Book
F.S. Mishkin, S.G. Eakins
“Financial Markets and Institutions”
Pearson International Edition
Sixth Edition, 2009
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-10
Chapters About Markets
• Ch. 2: Overview of the Financial System
• Ch. 3: What Do Interest Rates Mean and
What Is Their Role in Valuation?
• Ch. 4: Why Do Interest Rates Change?
• Ch. 5: How Do Risk and Term Structure
Affect Interest Rates?
• Ch. 11: The Stock Market
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-11
Chapters About Institutions
• Ch. 15: Why Do Financial Institutions Exist?
• Ch. 16: What Should Be Done About
Conflicts of Interest?
• Ch. 17: Banking and the Management of
Financial Institutions
• Ch. 18: Commercial Banking Industry:
Structure and Competition
• Ch. 20: Banking Regulation
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-12
For students who do not attend
lessons
• Attendance is not compulsory
• If you decide not to attend lessons, you should study
the chapters listed above and you will take a written
exam during the ordinary session of exams (from
January)
• The exam will comprise open questions, multiplechoice questions and exercises.
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-13
For students who attend
• If you decide to attend lessons, you can
take a partial exam on the first part of the
course at the beginning of November
• If you pass the partial exam, during the
ordinary sessions (from January) you will
be evaluated only on the second part of the
course
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-14
What to do to pass the partial exam
• In order to pass the partial exam you:
– complete project work (in groups, in class-time)
– take a written exam (multiple choice questions
and exercises about the topics analysed in
class)
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-15
Project work
• The students work in six groups. I will
assign a list of themes and each group
chooses one
• Each group works on the chosen topic and
makes a ppt presentation to the class at the
end of the first part of the course (each
student has to speak for 5 minutes…)
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-16
Project work: themes
• Pension funds.
• Pension schemes come in many forms and
are run by both the State and private
sector. What are the characteristics of
pension schemes in some of the main
European countries? What is the role of
pension funds?
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-17
Project work: themes
• Venture capital companies.
• Many start-ups or rapidly growing small
companies find it difficult to raise finance
from banks because they cannot provide
sufficient asset security and are often
regarded as highly risky. What is the role of
venture capital companies in some of the
main European countries? What are their
main activities?
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-18
Project work: themes
• Behavioural finance
• The field of behavioural finance seeks to
explain why and how financial markets can
be inefficient by bringing in insights from
human psychology to explain the behaviour
of financial market participants. What are
the main results of studies about
behavioural finance?
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-19
Project work: themes
• Collateralized debt obligations and credit
default swaps
• During the recent financial crisis, structured
finance products were “misunderstood,
misrated, mis-sold and mispriced”. What
are CDOs and CDSs? What was their role
in the financial crisis?
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-20
Project work: themes
• Transparency of Financial Institutions during
the Credit Crisis.
• Select a financial institution that had serious
financial problems as a result of the credit
crisis. Review the media stories about this
institution during the six months before its
financial problems were publicized. Were
there any clues that the financial institution
was having problems? Did its previous annual
report indicate serious problems?
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-21
Project work: themes
• Forecasting interest rates
• Review information about the credit market
in a recent issue of the Wall Street Journal
and identify the factors that are given
attention because they may affect future
interest rate movements. Then create your
own forecasts as to whether interest rates
will increase or decrease in the next six
months
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-22
Project work
• There are two “lessons” dedicated to the
preparation of project work: 7 October (for
studying the theme and looking for the
material) and 21 October (for preparing the
ppt presentation)
• You don’t need to work at home
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-23
Lesson
Date
1
22 September
2
23 September
3
28 September
4
29 September
5
30 September
6
5 October
7
6 October
Project work
7 October
8
12 October
9
13 October
10
14 October
11
19 October
12
20 October
Project work
21 October
13
26 October
14
27 October
15
28 October
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-24
Project work
• There are three lessons dedicated to the
presentation of the results: 26, 27 and 28
October
• During the first part of these lessons I will
lecture on the programme and during the
second part of each lesson two groups will
present the result of their analysis
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-25
Project work
• Each member of each group will receive a
mark related to the specific contribution to
the work and to the group overall results
• This mark represents half the final mark of
the first part of the course
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-26
Partial exam for students who attend
• The other half of the mark of the partial
exam is obtained with the written exam (on
2 nd November)
• For example:
– Project work: 30/30 (26 or 27 or 28 October)
– Written exam: 28/30 (2 November)
– Total partial exam mark: 29/30
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-27
To summarize…
• Students who do not attend: written exam
on the first and the second part of the
course from January
• Students who attend: partial exam at the
end of October / beginning of November
(project work + written exam)
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-28
To summarize…
• Students who attend : if you pass the exam
and you like the mark, you can go on to
take the exam on the second part of the
course…
• Your final mark will be the average of the
marks from the first and the second part of
the course
Copyright © 2009 Pearson Prentice Hall. All rights reserved.
1-29