SUBJECT:
Financial Markets, Instruments, and Institutions
HOURS:
30
ECTS:
4 pts
Name/title of the
author:
Course Description:
The course has introductory character and covers three groups of issues:
1) financial instruments and their pricing (different kinds of financial
instruments, different kind of risk connected with investment in
financial instruments, pricing cash flows generated by financial
instruments),
2) the structure of financial markets and instruments traded on them
(money market and its instruments, capital market and its
instruments, (bond market, equity market), foreign exchange
market and its instruments, domestic and international financial
markets, euromarkets, institutional structure of financial markets,
historical evolution, present state, possible scenarios of future
development of financial markets),
3) financial institutions, their characteristics and role in financial
markets (investment banks, commercial banks, other depository
institutions, nonbank financial institutions – insurance companies,
pension funds, investment funds).
Learning Outcomes
(Goals and Objectives of
the course):
At the
1)
2)
3)
4)
5)
6)
completion of the course the student should be able to:
understand basic financial markets vocabulary,
distinguish different kinds of risk on financial markets,
understand the basic principles of pricing financial instruments,
apply in practice different ways of pricing financial instruments,
distinguish different kinds of financial instruments,
understand functional and institutional structure of financial
markets,
7) distinguish different kinds of financial markets,
8) distinguish different kinds of financial institutions and recognize
their basic products.
Entrance qualifications:
Basic knowledge of financial mathematics
Course Content:
1. Financial instruments and their characteristics:
1.1. Debt and equity instruments
1.2. Fixed and floating income instruments
1.3. Derivatives.
2. Basic risks on financial markets:
2.1. Credit risk
2.2. Interest rate risk
2.3. Currency risk.
3. Pricing cash flows generated by financial instruments:
3.1. Basic rules
3.2. Pricing fixed income debt instruments
3.3. Pricing equity
3.4. Return measures.
4. Money market and its financial instruments:
4.1. Functional and institutional structure of money market
4.2. Characteristics of money market financial instruments.
5. Capital market and its financial instruments:
5.1. Functional structure of capital market
5.2. Institutional structure of main capital markets.
5.3. Institutional structure of capital market in Poland.
5.4. Characteristics of bond market financial instruments
5.5. Characteristics of equity market financial instruments.
6. Other market division:
6.1. Foreign exchange markets
6.2. Domestic vs. international money and capital markets
6.3. Euromarkets.
7. Financial institutions on the market:
7.1. Banks (investment and commercial) – basic information
7.2. Nonbank depository institutions
7.3. Insurance companies
7.4. Pension funds
7.5. Investment funds.
8. Basic products offered by nonbank financial institutions.
Assessment policy
(examination):
Course
materials/bibliography:
40% of final mark is composed of mark for final exam (multiple choice
test), 40% - of mark for paper and (or) a case study, 20% - of mark for
student’s activity (active participation in classes). If a final mark is
between marks to obtain (e.g. 4,25), the final result is rounded down to
the nearest mark obtainable.
1. Santomero, A. M., Babbel D. F.: Financial Markets, Instruments,
and Institutions, Irwin, Chicago, Ill. 1997 (or newer edition) (basic
handbook).
2. Mishkin, F.S., The Economics of Money, Banking and Financial
Markets (6th ed. or newer). Addison-Wesley, 2003 (or newer).
3. Materials from internet sites of financial exchanges and institutions
(describing i.a. their organization, structure, and products offered in
different countries).
4. Legal acts and regulations concerning securities, securities trading,
public offering, organization of financial markets, organization and
the scope of business activities of financial institutions in different
countries.
Methods of Instruction:
Lecture, discussion, exercises, papers’ analysis, case studies.
Notes / suggestions:
Case studies will be used only when the entrance level of economic
knowledge of students allows. The main purpose of exercises is to practice
the skill of pricing financial instruments. Papers are usually written on
issues from students’ countries of origin (in particular: organization of
financial markets, organization and the scope of business activities of
financial institutions and products offered by them).