Bahir Dar University
College of Business & Economics
Department of Accounting and Finance
MSc Program
T-Learning Process
Study Guide Book
Course Title: Financial Markets and Institutions
Course Code:
Course hours: 3
Target Group: MSc in Accounting and Finance Extension Students
Semester: I
Academic Year: 2020G.C
Course Instructor: Tilahun Aemiro, Asst. Professor
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Course Description
This course will provide students with an understanding of the financial system in general and the
operation and structure of financial markets and institutions in particular. It will also emphasize on the
characteristics and pricing of various financial instruments including derivative instruments. It aims to
develop awareness of the theoretical and practical problems associated with different systems of financial
markets regulations. The course covers topics such as financial assets and their pricing, equity markets,
bond markets, money markets, Foreign exchange markets, mortgage markets and asset securitization,
derivative markets, financial institutions, central bank and money creation and regulation of financial
institutions and markets.
Course Objectives
After successfully completing this course, students are expected to be able to:

Explain the role of financial system in a nation

Understand the structure and operation of depository financial institutions

Understand the structure and operation of non-depository financial institutions

Understand how the central bank creates or destroys money

Understand the characteristics and pricing of financial assets

Discuss the different forms of financial markets and their operations and

Describe the rational for and systems of financial regulation.
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Course Content
Week (Hrs)
Lecture Topic
Suggested Readings
Chapter 1: Introduction
Weeks 1-2
(6 hrs)
1.1.
Financial assets
1.2.
Financial markets
1.3.
Globalizations of financial markets
1.4.
Derivative markets
1.5.
Financial institutions
1.6.
Role of financial intermediaries
1.7.
Financial innovation
1.8.
Asset securitization
1.9.
Role of government in financial markets
Fobzzi, Modigliani and
Ferri(1998)
Foundations
of
Financial Markets and
Institutions, 3rd Edition,
prentice Hall
Chapter 2: Depository Institutions: activities and
characteristics
2.1. assets/liability problems
Weeks 3-6
(9 hrs)
2.2. Commercial banks
2.3. Saving and loan associations
Fobzzi, Modigliani And
Ferri(1998) Foundations
of Financial Markets
and Institutions, 3rd
Edition, prentice Hall
2.4. Saving banks
2.5. Credit unions
Chapter3: The central bank, creation of money and
monetary policy
3.1. The central bank
Weeks 6-8
(9 hrs)
3.2. Instruments of monetary policy
3.3. The money multiplier
Fobzzzi, Modigliani and
Ferri(1998) Foundations
of Financial Markets
and Institutions, 3rd
Edition, prentice Hall
3.4. Goals of monetary policy
3.5. Trade of and conflicts among policies
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3.6. Operating and intermediate targets
Chapter 4: Non-depository financial intermediaries(self
study)
Weeks 9-10
(9 hrs)
4.1. Insurance companies
4.2. Investment companies and exchange trade funds
4.3. Pension funds
Chapter 5: Determinants of asset price and interest rates
Weeks 1113
(6 hrs)
5.1. Properties and pricing of financial assets
5.2. The level and structure of interest rates
5.3. The term structure of interest rates
Fobzzi, Modigliani and
Ferri(1998) Foundations
of Financial Markets
and Institutions, 3rd
Edition, prentice Hall
Fobzzi, Modigliani and
Ferri(1998) Foundations
of Financial Markets
and Institutions, 3rd
Edition, prentice Hall
Chapter 6: Financial markets
6.1. Primary markets and underwriting of securities
6.2. Secondary markets
6.3. Treasury securities markets
6.4. Common stock markets
Weeks 1415
(6 hrs)
6.5. International stock markets
6.6. Corporate bond markets
Fobzzi, Modigliani and
Ferri (1998) Foundation
of Financial Markets
and Institutions, 3 rd
Edition, prentice Hall
6.7. Financial futures market
6.8. Options markets
6.9. Swaps, caps, floor and credit derivatives
6.10. The market for foreign exchange
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Teaching/Learning methods and strategies
Lecture classes, case analysis, article review, and presentation of group practical
exercises.
Assessment
 Group Practical Exercises ----------------------------------------15%
 Review Assignment (Group)-------------------------------------10%
 Presentation----------------------------------------------------------10%
 Article review (Individual)-----------------------------------------15%
 Final exam------------------------------------------------------------50%
 Total------------------------------------------------------------------100%
Group Practical Exercises
The professor will develop and provide students group practical exercises at the beginning of the
semester and each group (group size to be decided as it depends on the class size) will work out
the assignment and submit it one week before the class end.
Review Assignment
Students should write a review report on some of the topics that are expected to be addressed
under this course. Each group should submit their work in hard copy and also present it in class.
While the submitted hard copy will be evaluated on a group basis, for the presentation, each
student will be evaluated individually. The topics selected for this purpose include:
1.
2.
3.
4.
5.
6.
7.
Structure, Activities and Other Key Facts of Banking Industry in Ethiopia
The Financial Market in Ethiopia
Structure, Activities and Other Key Facts of Insurance Industry in Ethiopia
Structure, Activities and Other Key Facts of Pension Funds in Ethiopia
Structure, Activities and Other Key Facts of Microfinance Industry in Ethiopia
Regulation of Financial Institutions in Ethiopia
Structure, Activities and Other Key Facts of Credit Unions and Credit Cooperatives in
Ethiopia
Presentations:
1. Each group gets 30 to 45 minutes for the presentation. It is not required that every member of
the group will make the presentation; One person may do it for whole group (group members
5
should sit in front) but every member should participate in the question answer session since
grading could be discriminating on the basis of the same.
2. Each group will be required to act as an opponent, in the following way: For group one, the
opponent is the next group (group two); for the last group on the list, the opponent is group one.
3. Every group must send the review report (Word or PDF format) to the opponent members a
week before the presentation. At the same time you need to submit the hard copy to the course
instructor (me) so that the opponent group and I will have time to read it.
4. During the presentation, the opponent(s) will question and comment on either the review
report or the presentation itself. Of course all the participants are encouraged to ask questions as
well.
5. You must prepare the presentation slides and make it easy to be transferred to a PC before the
presentation (USB-disk or CD).
The Duty for the Opponent Group:
6. Ask minimum of 4 questions as well as comment on the review report and the presentation
immediately after the presentation.
7. Written evaluation (max. half page) should be submitted to the instructor immediately after the
presentation of the group to which you are assigned as an opponent group.
Article Review
The article review should be in financial markets and institutions area. One article review is
expected from each student. The article to be reviewed should not have the same title with one
reviewed by another student. To avoid any duplication of titles, students should inform their
representative in advance their article titles as early as possible so that the representative will
reserve the topic to them (first come first served). Students should submit the original article
together with the review they have done.
Final Exam
The Final exam will be conducted as per the college’s schedule.
Attendance:
Regular class attendance is required. If a student does not attend more than 80% of
the classes, he/she will not sit for final exam.
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Grading
Grading Scale
(90-100)
“A+”
>=90,
(75-80)
“B+”
>=75,
(58-65)
"C+"
>=60,
(85-90)
”A”
>=85,
(70-75)
“B”
>=70,
(50-58)
“C”
>=50,
(80-85)
“A-“
>=80,
(65-70)
“B-“
>=65,
(< 50)
“F”
< 50
Reference:
1. Fabozzi, Modigliani and Ferri(1998)Foundations of Financial Markets and
Institutions 3rd Ed. Prentice Hall
2. Bhole,M.(2004)Financial Institutions and Markets: Structure, Growth and Innovations,4th
Ed.Tata McGraw Hill/
3. Rose, P.(1989) Money and Capital Markets. 3rdEd.Richard D Irwin.
4. Rose, P.(2003), Money and Capital Markets: Financial Institutions & Instruments in a
Global Market place. Mc Graw-Hills
5. Santomero, A.M.& Babbel, D.(2001).Financial Markets, Instruments, and Institutions.
12th Ed.Irwin.
6. Saunders, A & Cornett M.(2001).Financial Markets and Institutions: A Modern
Perspective.2nd Ed. Mc Graw Hill
Local Materials:
7. Aemiro, Tilahun (2007) Financial Institutions and capital Markets, Distance Program
Teaching material. Bahir Dar University, Bahir Dar.
8. --------------(2000). Towards promoting Capital Markets in Ethiopia: Opportunities and
Challenges, Seminar Proceedings, Mekele University, Mekele
9. ----------------------(1960). Commercial Code of Ethiopia. Birhanena Selam Printing Press
Prepared by (Course Manager):
Tilahun Aemiro (Asst. Professor)
_________________________
Approved by:
Department Head
College Dean
_________________________
_____________________
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