Postgraduate Course: Financial Markets and Institutions (CMSE11166)
Course Outline
| School | Business School |
College | College of Humanities and Social Science |
| Course type | Standard |
Availability | Available to all students |
| Credit level (Normal year taken) | SCQF Level 11 (Postgraduate) |
Credits | 15 |
| Home subject area | Common Courses (Management School) |
Other subject area | None |
| Course website |
None |
Taught in Gaelic? | No |
| Course description | Managers in charge of the risk function in banks have to have background knowledge of the function of banks in a financial system, how interest rates which banks face are determined, how the markets in which some of the assets they hold operate and so how markets determine prices for different types of products and securities. This course will give each student a knowledge and understanding of these issues. Using the tools he/she will learn each student will be able to make qualitative predictions about prices and understand the roles of different financial companies in a financial system and how banks interact with them. |
Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
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Co-requisites | |
| Prohibited Combinations | |
Other requirements | None |
| Additional Costs | None |
Information for Visiting Students
| Pre-requisites | None |
| Displayed in Visiting Students Prospectus? | No |
Course Delivery Information
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| Delivery period: 2012/13 Semester 2, Available to all students (SV1)
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WebCT enabled: Yes |
Quota: None |
| Location |
Activity |
Description |
Weeks |
Monday |
Tuesday |
Wednesday |
Thursday |
Friday |
| No Classes have been defined for this Course |
| First Class |
First class information not currently available |
| Exam Information |
| Exam Diet |
Paper Name |
Hours:Minutes |
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| Main Exam Diet S2 (April/May) | Financial Markets and Institutions | 2:00 | | |
Learning Outcomes
On completion of this course, the student will be able to:
1. Knowledge and Understanding
After successfully completing the course the student will
&·understand economic principles of how interest rates are determined
&·understand what determines the demand and supply of money
&·understand fundamentally why financial institutions exist
&·understand different types of money and bond market instruments and how these markets work
&·understand how the prices of equities are determined and different degrees of stock market efficiency
&·have a knowledge of different types of mortgages and how they are securitized
&·understand how exchange rates are determined
&·understand concepts of moral hazard and asymmetry of information and the effects on financial markets
&·have knowledge of the role of investment banks
2. Cognitive Skills
On completion of the course a student will be able to
&·apply interest rate concepts to values certain types of securities
&·apply demand and supply concepts to understand price movements of different types of assets
&·analyse causes of changes in exchange rates
&·analyse the effects of moral hazard and information asymmetry on financial structure and bank and insurance company decisions
3. Professional/subject specific/practical skills
On completion of the course a student will be able to
&·compute present value, real interest rates and duration
&·value an equity given certain information
4. Transferable skills
During the course a student will develop skills to
&·communicate complex technical issues coherently and precisely
&·quantitatively analyse prices in terms of supply and demand
&·work intensively and methodically to understand technical issues
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Assessment Information
Exam, 2 hours, 70%
Assignment: 30%;
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Special Arrangements
| None |
Additional Information
| Academic description |
Not entered |
| Syllabus |
Lecture 1 Introduction
Overview of the Financial System
Lecture 2 Interest Rates
Measurement of interest rates, real and nominal interest rates, elementary portfolio theory. Demand and supply of bonds.
Lecture 3 Interest rates contd
Changes of equilibrium interest rates; risk and the term structure of interest rates.
Lecture 4 Rationale of Financial Institutions, Financial Crises
Reasons for the existence of financial institutions: transactions costs, asymmetric information, moral hazard, effects on financial structure. Causes and effects of financial crises.
Lecture 5 Money and Bond Markets
Purpose of money markets, who participates in money markets, money market instruments; money market mutual funds. Capital trading, capital markets securities: treasury bonds, municipal bonds, corporate bonds,; value of coupon bonds.
Lecture 6 Stock Markets and Mortgage Markets
Price of equity, how equity prices are determined, errors in valuation. Characteristics of residential mortgages, terms, amortization, types of mortgages, loan services and secritization, MBSs.
Lecture 7 Foreign Exchange and the International Financial System
What are exchange rates, exchange rates in the long run, exchange rates in the short run, changes in exchange rates. Intervention in the foreign exchange markets, balance of payments, the international financial system, capital controls.
Lecture 8 Commercial Bank Structure and Competition
Descriptive facts, transactions costs, asymmetric information, moral hazard and debt and equity contracts, effect of moral hazard on financial structure. Structure of the US & UK banking industries, international banking, savings and loans.
Lecture 9 Insurance Companies and Pension Funds
Fundamentals of insurance: adverse selection and moral hazard, types of insurance,. Types of pensions, regulation of pensions.
Lecture 10 Investment banks, Brokerage Firms & Mutual Funds
Purpose and role of investment banks, roles of securities brokers and dealers, types of mutual funds.
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| Transferable skills |
Not entered |
| Reading list |
Not entered |
| Study Abroad |
Not entered |
| Study Pattern |
Not entered |
| Keywords | Not entered |
Contacts
| Course organiser | Prof Jonathan Crook
Tel: (0131 6)50 3802
Email: |
Course secretary | Ms Samantha Rice
Tel: (0131 6)51 5332
Email: |
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© Copyright 2012 The University of Edinburgh - 7 March 2012 5:48 am
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