Master Degree in Finance and Insurance a.y Academic field: LM-16. Course Reference Sector: SECS-P/01 Course Total Credits ECTS/CFU: 12

Transcription

1 Updated 9/5/2018 Financial Markets Master Degree in Finance and Insurance a.y Academic field: LM-16 Course Reference Sector: SECS-P/01 Course Total Credits ECTS/CFU: 12 Instructor: Prof. Bernardina Algieri Department of Economics, Statistics and Finance University of Calabria I Arcavacata di Rende Web: COURSE DESCRIPTION The course provides a general survey of financial markets, financial institutions and the economy. It emphasizes an intuitive, logically rigorous understanding of the theory and practice of financial markets and their historical evolution, illustrating the concepts through examples and cases drawn from the public, private and non-profit sectors. Topics covered include: money, stocks and bonds, foreign currencies and exchange rates, term structure of interest rates, mutual funds, the principle of arbitrage, derivative securities (forwards, futures, and options) and derivative markets, hedging vs. speculation, regulations of financial markets, the role of Central Banks. The course is lecture based. Lectures include theory, tutorials and class discussions. Homework assignments will integrate lectures. BRIEF CONTENT Part I An Overview Of The Financial System Function and Structure of Financial Markets Primary and Secondary Markets Exchanges and Over-the-Counter Markets Foreign Exchange Markets

2 International Money and Credit Markets International Bond Markets, Eurobonds, and Eurocurrencies International Stock Markets Chap. 1 Why Study Money, Banking, and Financial Markets? Chap. 2 An Overview of the Financial System (excluding Regulation in the Financial System- Types of Financial Intermediaries) The Economic Fundamentals that influence the Financial Markets: GDP Gross domestic product versus gross national product. GDP measurement methods. Aggregate and per-capita income. Income in nominal and real terms. Comparisons of income between countries: GDP assessed at purchasing power parity. Financial markets and real markets. The index of human development. Chap. 22 Measuring a Nation s Income Chap.25 Saving, Investment, and the Financial System The Money Market The currency market. Money Demand and Supply. The ECB and the FED and monetary policies. Equilibrium in the money market. Chap. 27 The Monetary System Chap. 3 What Is Money? Tools of Monetary Policy Money supply control instruments. Federal Funds Rate Open Market Operations Reserves Non-conventional monetary manoeuvres: the quantitative easing Monetary aggregates Chap. 15 The Money Supply Process Chap. 20 Quantity Theory, Inflation, and the Demand for Money The Economic Fundamentals that influence the Financial Markets: Inflation Inflation and the Cost of Life Inflation and the rate of inflation.

3 Inflation in History. Consumer price indices. The causes of inflation. The "core" and "headline" inflation rates. The "inflation targeting" of the Central Banks. The International Financial Environment Chap.23 Measuring the Cost of Living Chap. 28 Money Growth and Inflation Stock Market Characteristics of the Stock Market Equity and Shares Stock Market Capitalization Stock Quotes Line, Candlestick and Bar Charts Stock Listing Primary Market and IPO Chap. 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypo. Demand and Supply in the Stock Market Demand Schedule in the Stock Market (Secondary Market) Supply Schedule in Stock Market Market equilibrium Demand and Supply Shifters Bullish consumers Bearish sellers Introduction to Financial Markets and Instruments by Gary R. Evans Chap. 3 A Supply and Demand Model for Stocks (available in Material) The Financial Crisis Causes and consequences The comparison with the Great Recession

4 Part II Closed versus Open Economies File A model of monopolistic competition and free trade Bond Market The main characteristic of Bond Market Types of Bonds Differences between T-Bill, T-Notes, T-Bond Bond Rating Corporate Bonds vs. Government Bond Chap. 1 Why Study Money, Banking, and Financial Markets? (page 49) Chap. 2 An Overview of the Financial System (pages 73-77) Chap. 4 The Meaning of Interest Rates (pages ) Chap. 6 The Meaning of Interest Rates (pages ) The Public Budget and Debt Government Bond and Public Debt Public spending and its financing. The public budget in Italy: definitions and data. Deficit and public debt. The reasons for the indebtedness of the countries. Maastricht Parameters and Stability Pact. Instruments of economic policy to restore public debt. Measures of default risk. The level of taxation: the Laffer curve. File Government Debt File Government Spending File Budget (22.2 The Government Budget Constraint: Deficits, Debt, Spending, and Taxes) Open Economies & The Balance of Payments The flow of goods: exports, imports and net exports The accounts of the Balance of payments. Trade Balance. Surplus and Deficit. Errors and omissions in the balance of payments. Analysis of the Italian balance of payments. Chap.29 Open Economy Macroeconomics

5 File BOP and Exchange rate Foreign Exchange Markets The characteristics of the foreign exchange market. Operators in the foreign exchange market. History of Foreign Exchange Foreign Exchange Transactions Spot and Forward Markets Foreign Exchange Quotations Exchange Rate Systems Chap. 18 The Foreign Exchange Market File BOP and Exchange rate File Exchange rate 2 (Chap.14 Foreign Exchange Markets and Exchange Rates) Exchange Rate Determination and International Parity Conditions How exchange rates are determined. Exchange Rate Movements Exchange Rate Equilibrium Interest Rate Parity Speculative Transactions and Risk in the Foreign Exchange Market Purchasing Power Parity and Real Exchange Rates The Big Mac Index. Chap. 18 The Foreign Exchange Market Chap. 19 The International Financial System File Exchange rate 2 (Chap.15 Exchange Rate Determination) Investing in Foreign Exchange Markets Returns in foreign currency Investing in US and Euro currency deposits File BOP and Exchange rate The Derivatives Markets History of Derivative Markets Futures, Forward contracts Option and Swaps

6 EXAM PREPARATION MATERIALS Recommended textbooks for the course Latest Edition 11 th edition The Pearson Series in Economics. Cap. 1 Why Study Money, Banking, and Financial Markets? Cap. 2 An Overview of the Financial System (excluding Regulation in the Financial System- Types of Financial Intermediaries) Cap. 3 What Is Money? Cap. 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis Cap. 15 The Money Supply Process Chap. 18 The Foreign Exchange Market Chap. 19 The International Financial System Cap. 20 Quantity Theory, Inflation, and the Demand for Money Cap. 22 Measuring a Nation s Income Cap.23 Measuring the Cost of Living Cap.25 Saving, Investment, and the Financial System Cap. 27 The Monetary System Cap 28 Money Growth and Inflation Chap.29 Open Economy Macroeconomics Introduction to Financial Markets and Instruments by Gary R. Evans Cap. 3 A Supply and Demand Model for Stocks (available in Material) Further Textbooks: Financial Markets and Institutions, Frederic Mishkin & Stanley Eakins. Latest Edition (Pearson 9 th edition) International Financial Management, Geert Bekaert & Robert Hodrick. International Financial Management, Jeff Madura. Foundations of Financial Markets and Institutions, Frank J. Fabozzi, Franco Modigliani, Frank J. Jones & Michael G. Ferri. Regular reading of financial news in publications such as The Financial Times, The Wall Street Journal, or the Business pages of The New York Times is strongly recommended. Readings and case studies will be available during the course.