Class History: Financial Markets & Institutions (Spring 2019)

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Course: Financial Markets & Institutions (Spring 2019)

- Regular classes: 21
- Extra classes: 5
- Total classes: 26
- Class time: Monday 1:00 PM (Room: 901) and Wednesday 12:30 PM (Room: 901).

Class 1

January 16, Room 901, Time: 12:40 – 13:40

An overview of the Finance major and the course.

Class 2

January 21, Room 901, Time: 12:40 – 13:45

Time value of money. Impact of interest rate on TVM. Interest rate and bid-ask spread. Various proxies for measuring risks in finance. Measuring interest rate risk unsung maturity gap.

Class 3

January 23, Room 901, Time: 12:45 – 14:00

Money and its functions. Types of financial markets: money vs. capital market, primary vs. secondary markets, and organized vs. Over the Counter markets. Direct vs. indirect investment. Role of financial institutions. Impact of asymmetric information.

Class 4

January 28, Room 901, Time: 12:45 – 14:00

Various types of financial instruments. Money market instruments: Treasury bill, Repo. Capital market instruments: treasury bond, treasury bill, corporate bond, debenture, preferred stock, common stock.

Class 5

January 30, Room 902, Time: 12:40 – 13:55

Derivative instruments: Forward contract, futures contract, options (put, call, American, and European). Mortgage instruments: constant payment mortgage, constant amortization mortgage, graduated payment mortgage, shared appreciation mortgage, variable rate mortgage.

Class 6

February 4, Room 901, Time: 13:00 – 14:00

Hedging, arbitrage, and speculation. Term structure of the interest rate. Demand and supply of loanable funds (household, government, and business demand). Factors that affects the supply of loanable funds.

Class 7

February 6, Room 902, Time: 13:00 – 14:10

Sources of loanable funds. Factors that affect the interest rate. Fisher effect.

Class 8

February 11, Room 901, Time: 13:00 – 14:00

Factors that affect the interest rate. Demand of loanable funds (business, foreign, household, municipal, and government demand).

Class 9

February 13, Room 902, Time: 12:55 – 14:10

Time value of money and interest rate related mathematical problems. Simple interest rate (math); compound interest rate (math). Simple vs. compound interest rate (math). Finding the effective rate (policy 1 vs. policy 2) (math). Future value of an annuity.

Class 10

February 18, Room 902, Time: 13:15 – 14:45

Future value. Designing a pension fund for unlimited years (math). Designating a pension fund for limited years (math).

Midterm Exam

March 2, Room B2-304/305, Time 12:00 PM

Syllabus: Chapter 1, 2, 3.

Class 11

March 13, Room 901, Time: 13:05 – 14:40

Real estate and mortgage. Price change pattern of various properties: gold, real estate, cars. Parties involved in a mortgage. Underwriting process in brief. Closing process in brief.

Class 12

March 18, Room 901, Time: 13:00 – 14:05

What is a mortgage? Types of mortgage based on default risk. Conventional mortgage, insured conventional mortgage, and FHA insured mortgage. Classification of mortgage based on payment structure. Fixed rate mortgages: constant payment, constant amortization, and graduated payment mortgage.

Class 13

March 20, Room 901, Time: 13:00 – 14:15

Adjustable rate mortgages: PLAM, ARM, and shared appreciation mortgage.

Class 14

March 27, Room 902, Time: 13:00 – 14:20

Note and its clauses. Deeds. Titie assurance and various methods of title assurance.

Class 15 (Extra)

March 20, Room 902, Time: 14:45 – 15:20

Insurance policies related to mortgage loans. The underwriting process.

Class 16

April 1, Room 902, Time: 13:00 – 14:30

The closing process. SAM example. Investment planning service: Risk, return, and constraints analysis. Investment management service. Active vs. passive management strategy. Asset allocation, investment analysis, and portfolio construction.

Class 17

April 3, Room 902, Time: 12:40 – 14:00

Investment trading services. Brokers vs. dealers. Sell side and buy side firms. Investment information services. Data vendors, research providers, and credit rating agencies. The IPO mechanisms. Price movement of newly-listed stocks in the first phase.

Class 18, Class 19 (Extra)

April 8, Room 902,

Time: 13:00 – 14:00 (Class 18); 14:00 - 14:40 (Class 19)

Front office, middle office, and back office. Leadership positions and staff in a typical sell side firm. What is index? Uses of index. Unweighted index. Price weighted index. Value weighted index.

Class 20

April 10, Room 902, Time: 12:30 – 13:45

DJIA, S&P 500, and S&P 100. Bond market indices. Comparison of indices over time. DSEX, DSE-30, and DSES. Circuit filter and circuit breaker in DSE.

Class 21, Class 22 (Extra)

April 15, Room 901,

Time: 13:00 – 14:00 (Class 21); 14:00 - 14:50 (Class 22)

What is EMH? Example of EMH with NPV. Overreaction and relayed response. Sources of efficiency: rational expectations, deviation from rationality, arbitrage, and following institutional investors. Types of efficiency. Empirical evidences of market efficiency.

Class 23

April 17, Room 902, Time: 12:30 – 14:00

Behavioral finance. Prospect theory and disposition effect. Why do investors sometimes make irrational decisions?

Announcement: Presentation on April 25.

Class 24

April 24, Room 901, Time: 13:15 – 14:30

Impact of human behavior on asset pricing. Regulations -- what is it? Types of regulations in the financial industry.

Class test (Quiz).

Class 25 (Extra), Class 26 (Extra)

April 24, Room 901,

Time:

15:15 – 16:30 (Class 25)

16:30 - 17:45 (Class 26)

Presentation.

Final Exam

May 4, Room 601

Time 14:00 - 16:00

Syllabus: Chapter 4, 5, 6, 7, 8.