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.
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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.
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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.
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Read, in Mishkin and Eakins, chapter 12 on pages 279-301.
Review the Lecture Notes
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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.
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Read, in Mishkin and Eakins, chapter 13 on pages 302-323.
Review the Lecture Notes.
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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
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Read, in Mishkin and Eakins, chapter 6 on pages 116-133.
Read, in Mishkin, chapter 7 on pages 186-208
Review the Lecture Notes
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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.
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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.
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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.
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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.
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8) |
• Midterm Exam
• Discuss the Midterm Exam.
• Explaining the specifics of the Midterm Exam.
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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.
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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.
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Read, in Mishkin, chapter 12 on pages 313-338.
Read, in Mishkin and Eakins, chapter 8 on pages 163-190.
Review the Lecture Notes.
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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.
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Read, in Mishkin and Eakins, chapter 11 on pages 254-278.
Review the Lecture Notes
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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.
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Read, in Mishkin and Eakins, chapter 14 on pages 323-343.
Review the Lecture Notes
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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.
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Lecture.
Application.
Read, in Mishkin and Eakins, chapter 15 on pages 344-374.
Review the Lecture Notes
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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.
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Read, in Mishkin, chapter 10 on pages 261-280.
Read, in Mishkin and Eakins, chapter 18 on pages 425-454.
Review the Lecture Notes
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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.
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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.
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Review the Lecture Notes. |