Course 2005-2006 a.y.

Course Objectives

This course has four main objectives:

• to provide participants with all the relevant information for a proper understanding of the different functions performed by the financial system;
• to analyze the role played by the different types of financial institutions, their management problems and economic models;
• to understand the technical features of financial instruments, their risk-return profile and pricing techniques;
• to examine the main financial markets and understand their microstructure, issuance and trading techniques.

Course Content Summary

The course will include four main sections.

• The first section is devoted to the analysis of the financial system main functions and to its relationship with the real economy. A comparative analysis of the structure of financial systems of major developed economies is also presented.
• The second section looks more closely at the different types of financial institutions (commercial banks, investment banks, insurance companies, mutual funds, securities firms, etc.). For each of them, the attention is focused on their major activities, their economics and management problems.
• The third section is dedicated to the analysis of capital markets. For each type of market (bond markets, stock markets, etc.) the technical features of instruments, together with issuance procedures and microstructure are examined.  
• Finally, the fourth section focuses on derivatives markets. Once again, for each type of instrument (forward, futures, swaps and options) the attention is focused on their technical features, their price determinants and on the use of these instruments as hedging tools. 

Detailed Description of Assessment Methods

Students can choose between the following two options:

• To take two written exams, one midway through the course (i.e. 1st partial exam), the other at the end of the course (i.e. 2nd partial exam). Each written exam consists of two open theory-related questions and one exercise, with 90 minutes time available. Students are not allowed to consult books and/or notes during the exam. The final grade will be based on a simple arithmetic average of the two grades. A minimum of 16 for each of the two exams is needed to get the final grade. The average will be rounded to the next integer (for example 21.5 will become 22). 
• To take only a final written exam, based on the material covered during the whole course. The exam will consist of three open theory-related questions and one exercise. Students will have 120 minutes time available.

Textbooks

• F.S. MISHKIN, S.G. EAKINS, Financial Markets+Institutions, Pearson Education, 2003, 4^th ed.