International Trade (English)
Bachelor	TR-NQF-HE: Level 6	QF-EHEA: First Cycle	EQF-LLL: Level 6

General course introduction information

Course Code:

FNCE303

Course Name:

Financial Markets and Institutions

Course Semester:

Fall

Course Credits:

Theoretical	Practical	Credit	ECTS
3	0	3	6

Language of instruction:

Course Requisites:

Does the Course Require Work Experience?:

Type of course:

Speciality Elective

Course Level:

Bachelor

TR-NQF-HE:6. Master`s Degree

QF-EHEA:First Cycle

EQF-LLL:6. Master`s Degree

Mode of Delivery:

Face to face

Course Coordinator :

Dr.Öğr.Üyesi MEHMET GÖKHAN GÖKTAN

Course Lecturer(s):

Dr.Öğr.Üyesi MEHMET GÖKHAN GÖKTAN

Course Assistants:

Course Objective and Content

Course Objectives:

The objective of this course is to analyze the overview of the financial system; specifics of financial institutions; stylized facts about the financial environment; asymmetric information in financial markets, adverse selection and moral hazard; impact of asymmetric information on financial institutions; agency theory and dynamics of financial crisis; measuring interest rates; the money markets; the bond markets; the stock markets and the market efficiency; the mortgage markets; the foreign exchange markets; international financial institutions; financial regulation.

Course Content:

Overview of the financial system; specifics of financial institutions; stylized facts about the financial environment; asymmetric information in financial markets, adverse selection and moral hazard; impact of asymmetric information on financial institutions; agency theory and dynamics of financial crisis; measuring interest rates; the money markets; the bond markets; the stock markets and the market efficiency; the mortgage markets; the foreign exchange markets; international financial institutions; financial regulation.

Learning Outcomes

The students who have succeeded in this course;

Learning Outcomes

1 - Knowledge
Theoretical - Conceptual
1) • Recognize the basic facts related with the financial markets and financial institutions.
2) • Introduce the key financial markets functioning specifics.
3) • Identify types and specifics of financial instruments and analyze their basic features.
2 - Skills
Cognitive - Practical
3 - Competences
Communication and Social Competence
Learning Competence
Field Specific Competence
Competence to Work Independently and Take Responsibility

Lesson Plan

Week	Subject	Related Preparation
1)	• Describe the course. • Explain why study financial markets. • Explain why study financial institutions. • Define function of financial markets. • Define structure of financial markets. • Explain internationalization of financial markets. • Syllabus. • Illustrate the structure of financial system. • Differentiate debt and equity markets. • Differentiate primary and secondary markets. • Differentiate exchanges and over-the-counter markets. • Differentiate money and capital markets. • Assess international bond market, Eurobonds, and Eurocurrencies.
2)	• Discuss the determinants of asset demand. • Define the bond market: demand and supply Framework. • Explain the market equilibrium in the bond market. • Explain the determination of interest rates: demand and supply shifts. • Evaluate the Bond Market framework under different macroeconomic policies. • Determine the factors affecting the asset demand. • Analyze how and towards which direction that wealth, expected returns, risk and liquidity affect the demand of an asset. • Identify the supply and demand in the Bond Market. • Assess the market equilibrium in the bond market. • Assess how equilibrium interest rates change with the help of bond market framework. • Analyze the changes in the interest rate due to expected Inflation: The Fisher Effect. • Illustrate the changes in the interest rate due to a business cycle expansion.	Review the Syllabus.
3)	• Explain the Purpose of the Capital Market. • List and discuss the Types of Bonds. • Explain Treasury Notes and Bonds. • Explain Municipal Bonds. • Explain Corporate Bonds. • Demonstrate the Valuation of Bonds. • Discuss the capital market participants. • Discuss the capital market trading. • Differentiate treasury notes and bonds. • Recognize the risk in the municipal bond market. • Analyze the characteristics of corporate bonds. • Compute the value of coupon bonds. • Compute the current yield.	Read, in Mishkin and Eakins, chapter 12 on pages 279-301. Review the Lecture Notes
4)	• Distinguish the Common Stock and Preferred Stock. • Explain how stocks are sold. • Recognize the pricing of common stocks. • Price-Earnings Valuation Method. • State how the market sets security prices. • Compute the price of common stock with the one-period valuation model. • Compute the price of common stock with the Generalized Dividend Valuation Model • Assess and analyze the Gordon Growth Model. • Assess and analyze the price earnings valuation method. • Recognize the stock market functioning with regard to equilibrium price settlements.	Read, in Mishkin and Eakins, chapter 13 on pages 302-323. Review the Lecture Notes.
5)	• Explain The Rational Expectations Theory. • Explain The Efficient Market Hypothesis. • Recognize the evidence in favor of the Market Efficiency. • Recognize the evidence against the Market Efficiency. • Discuss the several cases on the Market Efficiency. • Identify the Behavioral Finance. • Discuss the Weak Form of Market Efficiency. • Discuss the Stronger Form of Market Efficiency. • Illustrate the empirical evidence on the Efficient Market Hypothesis. • Discuss the Application: An Exception That Proves the Rule: Ivan Boesky (Chapter 6, p.122). • Discuss the Application: Should Foreign Exchange Rates Follow a Random Walk? (Chapter 6, p124). • Discuss the Application: Should You Hire an Ape as Your Investment Adviser? (Chapter 6, p.127). • Discuss the implications of Behavioral Finance	Read, in Mishkin and Eakins, chapter 6 on pages 116-133. Read, in Mishkin, chapter 7 on pages 186-208 Review the Lecture Notes
6)	• Recognize the Eight Basic Facts About Financial Structure Throughout the World. • State and describe Transaction Costs. • Discuss How Transaction Costs Influence Financial Structure. • Discuss How Financial Intermediaries Reduce Transaction Costs. • Differentiate the Asymmetric Information: Adverse Selection and Moral Hazard. • Recognize the Lemons Problem in the Stock and Bond Market. • Identify conflicts of interest with regard to ethcical behavior in financial institutions • Discuss that stocks are not the most important source of external financing for businesses. • Discuss that issuing marketable debt and equity securities is not the primary way in which businesses finance their operations. • Discuss that indirect finance, which involves the activities of financial intermediaries, is many times more important than direct finance, in which businesses raise funds directly from lenders in financial markets. • Discuss that financial intermediaries, particularly banks, are the most important source of external funds used to finance businesses.	Lecture. Application. Read, in Mishkin, chapter 8 on pages 208-232. Read, in Mishkin and Eakins, chapter 7 on pages 134-162. Review the Lecture Notes.
7)	• Recognize the Eight Basic Facts About Financial Structure Throughout the World (CONTINUED) • State and describe Transaction Costs. • Discuss How Transaction Costs Influence Financial Structure. • Discuss How Financial Intermediaries Reduce Transaction Costs. • Differentiate the Asymmetric Information: Adverse Selection and Moral Hazard. • Recognize the Lemons Problem in the Stock and Bond Market. • Identify conflicts of interest with regard to ethical behavior in financial institutions • Discuss that the financial system is among the most heavily regulated sectors of the economy. • Discuss that only large, well-established corporations have easy access to securities markets to finance their activities. • Discuss that collateral is a prevalent feature of debt contracts for both households and businesses. • Discuss that debt contracts typically are extremely complicated legal documents that place substantial restrictions on the behavior of the borrower. • Recognize the tools to help solve Adverse Selection problems. • Analyze Moral Hazard: Choice between debt and equity contracts. • Discuss how Moral Hazard influences financial structure in debt markets. • Identify the ethics in financial instituions concerning the issue of conflicts of interest, particulary with a strong emphasis on the recent financial crisis.	Lecture. Application. Read, in Mishkin, chapter 8 on pages 208-232. Read, in Mishkin and Eakins, chapter 7 on pages 134-162. Review the Lecture Notes.
8)	• Midterm Exam • Discuss the Midterm Exam. • Explaining the specifics of the Midterm Exam.	Lecture. Application. Read, in Mishkin, chapter 12 on pages 313-338. Read, in Mishkin and Eakins, chapter 8 on pages 163-190. Review the Lecture Notes.
9)	• Explain the Agency Theory and the definition of a Financial Crisis. • Classify the Dynamics of Financial Crisis in Advanced Economies. • Discuss the Great Depression and 2007-2009 financial crisis. • Classify Dynamics of Financial Crisis in Emerging Market Economies • Discuss the financial liberalization/globalization process. • Recognize the Financial Crisis in Advanced Economies; Stage One: Initiation of Financial Crisis. • Recognize the Financial Crisis in Advanced Economies; Stage Two: Banking Crisis • Recognize the Financial Crisis in Advanced Economies; Stage Three: Debt Deflation • Anlaze the Great Depression and the Credit Crunch. • Recognize the Financial Crisis in Emerging Economies; Stage One: Initiation of Financial Crisis • Recognize the Financial Crisis in Emerging Economies; Stage Two: Currency Crisis • Recognize the Financial Crisis in Emerging Economies; Stage Three: Full-Fledged Financial Crisis • Analyze and discuss the Financial Crisis in Mexico, 1994-1995; East Asia, 1997-1998; and Argentina, 2001-2002. • Analyze and discuss the Financial Crisis in Mexico, 1994-1995; East Asia, 1997-1998; and Argentina, 2001-2002.	Read, in Mishkin, chapter 12 on pages 313-338. Read, in Mishkin and Eakins, chapter 8 on pages 163-190. Review the Lecture Notes.
10)	• Define The Money Markets. • Explain The Purpose of Money Markets. • Discuss the Participants in the Money Markets. • Classify the Money Market Instruments. • Compare the Money Market Securities. • Discuss Why Do We Need the Money Markets? • State the Money Market cost advantages. • Explain and discuss the Treasury Bills. • Explain and discuss the Federal Funds (Interbank Market). • Explain and discuss the Repurchase Agreements (REPO). • Compare money market securities: Interest Rates and Liquidity.	Read, in Mishkin and Eakins, chapter 11 on pages 254-278. Review the Lecture Notes
11)	• Define the Mortgage Market. • Explain the Characteristics of Residential Mortgage. • Discuss the Types of Mortgage Loans. • Explain the Secondary Mortgage Market. • Explain and discuss the Securitization of Mortgages. • Identify the Subprime Mortgages and Collateralized Debt Obligations. • Recognize the Mortgage Interest Rates. • Discuss the Loan Terms. • Discuss the Mortgage Loan Amortization. • Justify the specifics of Mortgage Backed Security. • Identify the Pass Through Securities. • Discuss the Subprime Mortgages and the Real Estate Bubble in the US.	Read, in Mishkin and Eakins, chapter 14 on pages 323-343. Review the Lecture Notes
12)	• Define the Foreign Exchange Market • Explain the Exchange Rates in the Long-Run • Law of One Price • Theory of Purchasing Power Parity • Explain the Exchange Rates in the Short-Run: Supply and Demand Framework • Explain the Changes in Exchange Rates • Application: Changes in the Equilibrium Exchange Rates • Application: The Subprime Crisis and the Dollar • Explain Foreign Exchange Market. • Define Law of One Price. • Define Purchasing Power Parity (PPP). • Illustrate a Supply and Demand Analysis of Exchange Rates. • Recognize the changes in the exchange rates.	Lecture. Application. Read, in Mishkin and Eakins, chapter 15 on pages 344-374. Review the Lecture Notes
13)	• Define the Asymmetric Information (Adverse Selection and Moral Hazard) and Financial Regulation • Describe the Government Safety Net (emphasis on "Too Big To Fail" phenomenon) • Explain the Restrictions on Assets Holdings and Bank Capital Requirements (strong emphasis on off-balance-sheet activities and the Basel Accord) • State the importance of Risk Management • Identify the Disclosure Requirements and ethics in financial reporting. • Explain the International Financial Regulation • Recognize bank panics and deposit insurance • Recognize adverse selection and government safety net • Moral Hazard and the government safety net • Explain the Too Big to Fail phenomenon • Describe the Basel Accord (Basel II vs Basel III). • Recognize the restrictions on asset holdings, capital requirements and prompt corrective action • Explain the assessment of risk management • Identify the concepts of disclosure requirements, consumer protection and restrictions on competition. • Identify the specifics of International Financial Regulations regarding the code of ethics in financial reporting.	Read, in Mishkin, chapter 10 on pages 261-280. Read, in Mishkin and Eakins, chapter 18 on pages 425-454. Review the Lecture Notes
14)	• Review: Evaluate the Bond Market framework under different macroeconomic policies. • Review: Recognize the pricing of common stocks. • Review: Recognize the Eight Basic Facts About Financial Structure Throughout the World. • Review: Recogize the specifics of the money markets, the mortgage markets and the foreign exchange markets • Review: Identify the importance of the financial regulation • Analyze the changes in the interest rate due to expected Inflation: The Fisher Effect. • Illustrate the changes in the interest rate due to a business cycle expansion. • Compare money market securities: Interest Rates and Liquidity. • Assess and analyze the Gordon Growth Model. • Analyze mortgage contracts. • Explain the specifics of the foreign exchange markets. • Describe the process of financial regulation.	Review Lecture Notes.
15)	• Evaluate students via final exam. • Assess the student’s performance throughout the semester. • Analyze the final exam results in terms of further amelioration of the course. • Assess how to value a bond • Assess how to analyze the risk and term structures of interest rates • Assess how to value a common stock • Assess how to analyze the rational expectations theory • Assess how to value a mortgage contract. • Assess how to value money market instruments • Assess how to analyze the mortgage contracts, foreign exchange market equilibrium. • Assess how to recognize the financial crisis in developed and developing countries. • Assess how to identify the implications of the financial regulation.	Review the Lecture Notes.

Sources

Course Notes / Textbooks:	The Economics of Money, Banking and Financial Markets Frederick S. Mishkin, 12th ed., (Global Edition) 2019 ISBN-10: 1-292-26885-9 • ISBN-13: 978-1-292-26885-9 Financial Markets and Institutions Frederick S. Mishkin and Stanley G. Eakins, 9th ed., (Global Edition) 2018 ISBN 10: 1-292-21500-3 • ISBN 13: 978-1-292-21500-6
References:	The Economics of Money, Banking and Financial Markets Frederick S. Mishkin, 12th ed., (Global Edition) 2019 ISBN-10: 1-292-26885-9 • ISBN-13: 978-1-292-26885-9 Financial Markets and Institutions Frederick S. Mishkin and Stanley G. Eakins, 9th ed., (Global Edition) 2018 ISBN 10: 1-292-21500-3 • ISBN 13: 978-1-292-21500-6

Course-Program Learning Outcome Relationship

Learning Outcomes	1	2	3
Program Outcomes
1) To have theoretical and practical knowledge at the basic level supported by textbooks, application tools and other resources with current knowledge in the field based on the qualifications gained at the secondary level.
2) - To gain the ability to use the theoretical and practical knowledge at the basic level at an advanced level or at the same level in the same field. - To be able to interpret and evaluate the data by using the basic knowledge and skills acquired in the field, to identify and analyze the problems, to develop solutions based on evidence.
3) - To be able to convey his / her thoughts on basic knowledge and skills at the level of written and verbal communication. - To share his / her thoughts and solutions to the problems related to his / her field with experts and non-experts. - To be able to follow information in the field and communicate with colleagues by using a foreign language at least at a level of European Language Portfolio A2 General Level. - To be able to use information and communication technologies together with computer software at the basic level of European Computer Driving License required by the field.
4) - To be able to evaluate the basic knowledge and skills acquired in the field with a critical approach, to determine and meet the learning needs. - To be able to direct his / her education to an advanced level of education in the same field or to a profession at the same level. - Not to have gained awareness of lifelong learning.
5) - To have social, scientific, cultural and ethical values in the stages of collecting, applying and announcing the data related to the field. - To have sufficient awareness of the universality of social rights, social justice, quality and cultural values, environmental protection, occupational health and safety.
6) - To be able to conduct a basic level study independently. - To be able to take responsibility as a team member to solve unforeseen complex problems encountered in the applications related to the field. - To be able to carry out activities for the development of employees working under their responsibility within the framework of a project.
7) - To have advanced theoretical and practical knowledge supported by textbooks containing current information in the field, application tools and other resources.
8) To be able to use the advanced theoretical and practical knowledge acquired in the field. - Interpret and evaluate data using the advanced knowledge and skills acquired in the field, identify problems, analyze, develop solutions based on research and evidence.
9) - To be able to inform the relevant persons and institutions about the related subjects; transfer ideas and solutions to problems in written and orally. - To share his / her thoughts and solutions to the problems related to the field with the experts and non-experts by supporting them with quantitative and qualitative data. -To be able to organize and implement projects and activities for the social environment in which he / she lives with a sense of social responsibility. - To follow the information in his / her field and to communicate with his / her colleagues by using a foreign language at least at the European Language Portfolio B1 General Level. - To be able to use information and communication technologies together with computer software at the Advanced Level of European Computer Driving License required by the field. - To act in accordance with social, scientific, cultural and ethical values in the stages of collecting, interpreting, applying and announcing the data related to the field. - To have sufficient awareness about the universality of social rights, social justice, quality culture and protection of cultural values, environmental protection, occupational health and safety.
10) - To be able to critically evaluate the advanced knowledge and skills acquired in the field, - Identify learning needs and direct learning. - To develop positive attitudes about lifelong learning.
11) To act in accordance with social, scientific, cultural and ethical values in the stages of collecting, interpreting, applying and announcing the data related to the field. - To have sufficient awareness about the universality of social rights, social justice, quality culture and protection of cultural values, environmental protection, occupational health and safety
12) - To be able to conduct an advanced study independently. - To be able to take responsibility as an individual and as a team member to solve unforeseen complex problems encountered in the applications related to the field. - To be able to plan and manage activities for the development of employees working under their responsibility.

Course - Learning Outcome Relationship

No Effect	1 Lowest	2 Low	3 Average	4 High	5 Highest

	Program Outcomes	Level of Contribution
1)	To have theoretical and practical knowledge at the basic level supported by textbooks, application tools and other resources with current knowledge in the field based on the qualifications gained at the secondary level.
2)	- To gain the ability to use the theoretical and practical knowledge at the basic level at an advanced level or at the same level in the same field. - To be able to interpret and evaluate the data by using the basic knowledge and skills acquired in the field, to identify and analyze the problems, to develop solutions based on evidence.
3)	- To be able to convey his / her thoughts on basic knowledge and skills at the level of written and verbal communication. - To share his / her thoughts and solutions to the problems related to his / her field with experts and non-experts. - To be able to follow information in the field and communicate with colleagues by using a foreign language at least at a level of European Language Portfolio A2 General Level. - To be able to use information and communication technologies together with computer software at the basic level of European Computer Driving License required by the field.
4)	- To be able to evaluate the basic knowledge and skills acquired in the field with a critical approach, to determine and meet the learning needs. - To be able to direct his / her education to an advanced level of education in the same field or to a profession at the same level. - Not to have gained awareness of lifelong learning.
5)	- To have social, scientific, cultural and ethical values in the stages of collecting, applying and announcing the data related to the field. - To have sufficient awareness of the universality of social rights, social justice, quality and cultural values, environmental protection, occupational health and safety.
6)	- To be able to conduct a basic level study independently. - To be able to take responsibility as a team member to solve unforeseen complex problems encountered in the applications related to the field. - To be able to carry out activities for the development of employees working under their responsibility within the framework of a project.
7)	- To have advanced theoretical and practical knowledge supported by textbooks containing current information in the field, application tools and other resources.
8)	To be able to use the advanced theoretical and practical knowledge acquired in the field. - Interpret and evaluate data using the advanced knowledge and skills acquired in the field, identify problems, analyze, develop solutions based on research and evidence.
9)	- To be able to inform the relevant persons and institutions about the related subjects; transfer ideas and solutions to problems in written and orally. - To share his / her thoughts and solutions to the problems related to the field with the experts and non-experts by supporting them with quantitative and qualitative data. -To be able to organize and implement projects and activities for the social environment in which he / she lives with a sense of social responsibility. - To follow the information in his / her field and to communicate with his / her colleagues by using a foreign language at least at the European Language Portfolio B1 General Level. - To be able to use information and communication technologies together with computer software at the Advanced Level of European Computer Driving License required by the field. - To act in accordance with social, scientific, cultural and ethical values in the stages of collecting, interpreting, applying and announcing the data related to the field. - To have sufficient awareness about the universality of social rights, social justice, quality culture and protection of cultural values, environmental protection, occupational health and safety.
10)	- To be able to critically evaluate the advanced knowledge and skills acquired in the field, - Identify learning needs and direct learning. - To develop positive attitudes about lifelong learning.
11)	To act in accordance with social, scientific, cultural and ethical values in the stages of collecting, interpreting, applying and announcing the data related to the field. - To have sufficient awareness about the universality of social rights, social justice, quality culture and protection of cultural values, environmental protection, occupational health and safety
12)	- To be able to conduct an advanced study independently. - To be able to take responsibility as an individual and as a team member to solve unforeseen complex problems encountered in the applications related to the field. - To be able to plan and manage activities for the development of employees working under their responsibility.

Learning Activity and Teaching Methods

Individual study and homework
Lesson
Homework
Problem Solving

Assessment & Grading Methods and Criteria

Written Exam (Open-ended questions, multiple choice, true-false, matching, fill in the blanks, sequencing)
Application

Assessment & Grading

Semester Requirements	Number of Activities	Level of Contribution
Attendance	1	% 10
Quizzes	3	% 15
Midterms	1	% 25
Final	1	% 50
total		% 100
PERCENTAGE OF SEMESTER WORK		% 50
PERCENTAGE OF FINAL WORK		% 50
total		% 100

Workload and ECTS Credit Grading

Activities	Number of Activities	Workload
Course Hours	16	48
Study Hours Out of Class	15	90
Project	1	12
Homework Assignments	3	6
Quizzes	2	1
Midterms	1	8
Final	2	25
Total Workload		190