University of Jordan Jordan University Business School (JUBS)

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1 University of Jordan Jordan University Business School (JUBS) Course Syllabus Form 1. Department: Finance 2. Program: Bachelor of Finance 3. Course code: 03. Course title: Financial Markets 5. Course credits: 03 Hours 6. Pre-requisites: Principles of Managerial Finance ( ) 7. Course Instructor/ coordinator and Dr. Mohammad Tayeh 8. Course web-page: - 9. Academic year: 2016/ Semester: First Second Summer 11. Textbook(s) The primary textbooks for this course are: - Anthony Saunders & Marcia Millon Cornett, Financial Markets and Institutions, 6 th edition, McGraw Hill. This book is available at the Academic Center for College Textbooks. - Larry Harris, Trading and Exchanges: Market Microstructure for Practitioners, 1 st edition, Oxford University press, Inc., New York. 12. References: - Jeff Madura, Financial Institutions and Markets, 9 th edition, South Western. - Fabozzi, Frank J., Franco Modigliani, Frank J. Jones, and Michael G. Ferri. Foundations of Financial Markets and Institutions, th ed. Prentice Hall, Article Papers will be assigned during the course. 13. Other resources used elearning 1. Course description This course provides a comprehensive introduction to financial markets including their types, function and the financial instruments that are traded in such markets, using descriptive, analytical and conceptual tools that constitute the basis of the finance discipline. This course covers three main parts related to financial markets that enhance the knowledge in this field: the first part is the introductory part which focuses on the role of financial markets in the economy and analyzes the risk and the determinants of interest rates. The second part is about securities markets, which discusses the types of financial markets in details including Money Markets, Bond Markets, Stock Markets, Futures and Options markets. The final part introduces some market microstructure issues related to different type of trading systems (floor versus electronic trading system), order execution systems (i.e. order-driven versus quote driven systems) and market microstructure characteristics which include liquidity and volatility. 1

2 15. Course Intended Learning Outcomes: Mappingto PILOs CILOs Knowledge and Understanding: Student is expected to: 1.1 Understand fundamentally the various types of financial markets and why financial markets exist. 1.2 Describe different theories of how interest rates are determined, understand its role in economy and explain the relationship between the term to maturity, risk, and interest rates. 1.3 Demonstrate understanding of how the prices of equities are determined and different forms of stock market efficiency. 1. Understand different types of money, bond and equity market instruments and how these markets work. 1.5 Understand the process of underwriting of different types of financial securities, and have knowledge of the operations of primary and secondary markets. 1.6 Understand the mechanics and conventions of the foreign exchange market and the motivation of different participants in trading foreign currencies. 1.7 Have a good knowledge of derivatives markets and understanding the characteristics different types of derivative securities traded in those markets. 1.8 Distinguish between different trading systems as well as differentiate between execution systems. 1.9 Understand the concept of liquidity and volatility and be able to differentiate between the various aspects of liquidity. 2- Intellectual Analytical and Cognitive Skills: Student is expected to: 2.1 Apply demand and supply concepts to understand interest rates movements of different types of assets and identify factors that cause a change in demand and supply curves. 2.2 Apply interest rate concepts to values certain types of securities. 2.3 Identify the factors that cause the changes in exchange rates. 3- Subject- Specific Skills: Students is expected to 3.1- Compute present value, real interest rates and duration Apply different valuation techniques to determine share prices given certain information Apply the economic aspect of duration concept to calculate the change in the prices of fixed income securities. 3.- Possess the ability to analyze the behavior and performance of financial markets in which different participants trade. 2

3 - Transferable Key Skills: Students is expected to.1 Build a solid theoretical and analytical foundation for different concepts gained by this course, upon which the understanding of the nature and operations of various types of markets will be built..2 Communicate complex technical issues coherently and precisely..3 Quantitatively analyze prices in terms of supply and demand and work intensively and methodically to understand technical issues related to financial markets.. Posses the ability to discuss and write about the links between the theories of financial markets and the reports in the financial press..5 Posses the ability to read and discuss financial markets' quotes and prices reports published in financial press. 16. Course evaluation:(formative and summative assessment methods are expected) Assessment Type Details/ Frequency Weight Date(s) Explanation of Assessment in relation to CILOs Midterms The midterm 1 30 % To be announced exam examines the CILOs #1, #2. #3 and # Second exam The second exam 1 10% To be announced examines the CILOs #1, #3 and # Assignments The assignments 10 % covers the CILOs #1, #2 #3 and # Final measures all of 1 50% According to the the CILOs: final schedule 0 Multiple announced by choice registration unit. Total 100% 17. Description of Topics Covered Topic Title (e.g. chapter title) Introduction 3 Description The chapter provides: An overview of financial markets. An overview of financial institutions. The reasons behind the Globalization of financial markets as well as financial institutions.

4 Determinants of Interest rates Interest Rate and Security Valuation Money Markets Bond Market Stock Markets Market Structure Order-Driven Markets Floor versus Automated Trading Systems Liquidity Examines the link between the time value of money and interest rate. Identify the demanders and suppliers of loanable funds. Examines the factors that cause the shift in quantity supplied and demanded of lonable funds. Examines the factors that determine interest rates. Discusses the different theories that explain the term structure of interest rate. Interest Rates as a Determinant of Financial Security Values Introduce Various Interest Rate Measures Bond Valuation Discuss the Impact of Interest Rate Changes on Security Values Explain the Impact of Maturity on Security Values Explain Impact of Coupon Rates on Security Values Discuss the Duration Overview of money markets. Define and review the various money market instruments that exist. Introducing the new issue and secondary market trading process. Who are the market participants trading these securities. Definition of Bond Markets Explain different types of Bond Market Securities Who are the Bond Market Participants Comparison of Bond Market Securities International Aspects of Bond Markets Introduce to international bonds market; Eurobonds, Foreign Definition of Stock Markets Stock Market Securities Explain and discuss the Primary and Secondary Stock Markets Who are the Stock Market Participants Introduce other Issues Pertaining to Stock Markets; Economic Indicators, Market Efficiency, Stock Market Regulations Explain the International Aspects of Stock Market Define the concept of market structure Explain the different types of market structures Call versus continuous trading session. Order-driven versus quote driven execution systems. Floor versus electronic trading system. Define the Order-Driven Markets Introduce the operation of Order-Driven Markets Explain the Mechanism of Executing Orders under this system. Explain the trading rules applied in this Execution system. Compare between the order-driven market and quote driven markets Introduce and define the different trading systems. Discuss the floor trading system and its characteristics Discuss the electronic trading system and its characteristics Define the concept of liquidity Introduce and explain its different dimensions: immediacy, width, depth and resiliency.

5 Volatility Discuss the importance of liquidity as a key characteristic of financial markets. Explain the usefulness of liquidity to different market participants. Define the concept of volatility Discus the two types of volatility; Fundamental and transitory volatility. Explain the measurement of volatility and its components Week Topics covered CILOs Teaching Method Assessment 1 Introduction No. 1 2,3 Determinants of Interest rates Interest Rate and Security Valuation No. 1, 2, 3, No. 1, 2, 3, 5,6 Money Markets No. 1, 3, 7,8 Bond Market No. 1, 3, 9,10 Stock Markets No. 1, 3, 10,11 Market Structure No. 1 11,12 Order-Driven Markets No. 1 12,13 Floor versus Automated Trading Systems No. 1, 1 Liquidity No. 1, 1 Volatility No. 1, 15 Foreign Exchange markets No. 1, 3, 16 Derivative Markets No. 1, 3, 5

6 18. Others: Attendance policies: Absences from exams and handing in assignments on time: Health and safety procedures: Honesty policy regarding cheating, plagiarism, misbehavior: Description Students are not allowed to miss more than 15% of the classes during the semester. Failing to meet this requirement will be dealt with according to the university disciplinary rules. Please do not come to class late or leave early No make-up exam could be held if the student failed in providing approved absence form signed by the dean or the Assistant Dean for Students affairs. Students are required to submit assignments on specific deadlines that are determine at the end of each chapter. N/A Academic misconduct includes, but is not limited to, the following: cheating, plagiarism, tampering with academic records and examinations, falsifying identity, and being an accessory to acts of academic dishonesty. Any academic dishonesty will NOT be tolerated and will result, at least, in failing grade for the particular exam that cannot be dropped, and may lead to a failing grade for the entire course. It could also lead to suspension or expulsion from the university. The student will be subject to the University policy as outlined by the University disciplinary rules. Students are kindly requested to turn off or keep their mobiles on silent mood during the lecture. Any disturbance caused by mobile phones will not be tolerated and mobile owner will be requested to leave the class. Course Coordinator: Head of Department: Head of curriculum committee: Dean: Dr. Mohammad Tayeh Dr. Bashar Abu Khalaf Dr. Samer Dahiyat Prof. Rifat Shannak Approved by the Quality officer of the department on: 6

7 Copy to: Chair of Department Assistant dean for Development and Quality Assurance Course Portfolio 7