Course Title: Financial Market and Institutions

Course Code:
Credit Hours: 3+0
Course Instructor: Dr Shehla Akhtar

Mode of Contact"
You can contact your course instructor in the following ways:

Email: shakhtar@numl.edu.pk
Meeting: By appointment via e-mail

PREREQUISITES: As a finance course, you must have an understanding of Financial Accounting and Financial Management.

Textbook:
• Mishkin, S. and Eakins, G., “Financial Markets + Institutions”, 9th Edition, Pearson Education (or latest edition)

Reference Material:

• Peter S. and Milton H. Marquis, Money and Capital Markets: Financial Institutions and Instruments in a Global Marketplace, 9th edition, McGraw-Hill/Irwin,
ISBN 0-07-295739-5, 2006.
• “Investment Analysis and Portfolio Management” by Frank K. Reilly and Keith C. Brown (10th or latter edition)

Course Description: A survey of money and capital markets and the role they play in financial intermediation, capital formation, economic growth, monetary
policy and business cycles. This course provides an overview of the global financial system, introducing the important institutional players, describing and

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 classifying financial markets where institutions and individuals operate, and developing an analytical framework to understand the determinants of prices and
yields at which financial transactions occur.

The course is roughly evenly split between institutional details concerning the organization of the contemporary financial system and the conceptual and
analytical approaches used to understand past, current, and future developments in financial markets. The course provides an integrated analytical framework
for understanding the effects of economic forces and economic policy on key financial market variables that determine the success of business strategies and
present risks to firms or individuals from changes in interest rates, equity values, and exchange rates.

Course Objectives and Learning Outcomes: This course will introduce participants to the generally accepted knowledge and principles surrounding the field
of Financial Markets and Institutions. Moreover, this course is aimed at study of the fundamentals of financial markets and financial instruments, the features
of the formation of modern financial markets, on the practical application of financial instruments, the types of financial institutions and their roles and functions
in the financial markets. Enabling the students to analyze, evaluate and synthesize both quantitative and qualitative financial information to influence problem
solving and decision making. The course also aims to:
1. To enable the students to understand the financial environment and fundamental concepts of financial institutions and markets including the role of financial system in the
economy.
2. To enable students to understand the operational and managerial mechanism of money, capital and other financial markets.
3. To enable the students to understand the financial mechanism and operational mechanism of various financial institutions.
4. Determine and analyze the appropriate measures of risk and return for various financial instruments. Understand the mechanics and regulation of financial securities and
determine how the value of stocks, bonds, and other securities are calculated.
5. Explore the international integration of international financial markets and analyze the implications for financial managers.

ASSESSMENT INSTRUMENT WITH WEIGHTS:

S
N ITEMS MARKS
R
Mid Term Exam 30
1

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 End Term Exam 50
2

3 Internal Evaluation Breakdown

Quiz(s)
Assignements(s)
Class Participation
Présentations
Case Discussion
Lab Work/Practical Project
Any Other
Total 20 20
GRAND TOTAL 100

COURSE CONTENTS

Learning Assessment
Lecture Scheduled Topic PLO CLO Thinking Level
Activity Activity
01 Introduction
■ Overview of the Course
Lecture PLO 2 CLO 1 Knowledge
■ Introduction to Financial Markets and
Institutions
02 ■ Financial and economic mechanism Lecture PLO 2 CLO 1 Comprehension

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 ■ Why study financial markets and
institutions
03 Overview of the Financial System
■ Institutions, processes and types of markets
Lecture PLO 2 CLO 1 Comprehension
■ Functions of Financial Markets
■ Structure of Financial Markets
04 ■ Function of Financial Intermediaries: Indirect
Finance
■ Types of Financial Intermediaries
Lecture PLO 2 CLO 3 Comprehension
-Banking Sector Institutions
-Other Financial Intermediaries
■ Regulations of the Financial System
05 Why Do Interest Rates Mean and What is Their
Role in Valuation?
Lecture PLO 2 CLO 1 Comprehension
■ Measuring interest rates
■ Interests rates and their role in valuation
06 ■ The distinction between real and nominal
interest rates
Lecture PLO 2 CLO 1 Comprehension
■ The distinctions between interest rates and
returns
07 ■ Numerical of Security Valuation Lecture PLO 4 CLO 4 Comprehension & Application
08 ■ Interest rate, its determination and role of central
Lecture PLO 2 CLO 3 Comprehension
bank in regulating Interest rate
09 ■ Efficiency of Financial Markets.
Lecture PLO 2 CLO 1 Comprehension
■ Role of central bank in economy
10 The Money Market Lecture PLO 2 CLO 2 Comprehension

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 ■ Purpose and explanation of money market
■ Participants in the money market
■ Money Market Instruments
■ Comparing money market instruments
11 ■ Valuation of Money Market Instruments
Lecture Assignment 1 PLO 4 CLO 4 Application
(Numerical)
12 The Bond Market
■ Purpose of capital market CLO 2
Lecture PLO 2 Comprehension & Analysis
■ Capital Market participants &5
■ Capital Market Trading
13 ■ Various types of bonds and their characteristicsLecture Quiz 1 PLO 2 CLO 2 Comprehension
14 ■ Valuation of Bond Market Instruments (Numerical)
Lecture Assignment 2 PLO 4 CLO 4 Comprehension & Application
15 The Stock Market
■ Types of stocks
■ Characteristics of a good market
■ Importance of secondary market
■ Types of equity/stock markets
-National stock exchanges Assignment 3 CLO 2
-Regional stock exchanges Lecture PLO 2 Comprehension & Application
&4
-OTC market
■ How the market sets security prices
■ Trading systems
-Pure auction market
-Dealer market

16 The Stock Market CLO Comprehension, Application &

Lecture Presentation PLO 2
■ Updated trading systems 2, 4 & Analysis
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 -Super dot 5
-Display Book
■ Electronic communication networks (ECN)
■ Exchange traded funds (ETFs)
■ Recent consolidations
■ Stock market indices
17 The Stock Market
■ Trading in the stock market
-Exchange Membership
-Major Types of Orders Lecture PLO 4 CLO 4 Application & Analysis
-Margin transactions
-Exchange Market Makers
■ Stock market performance in Pakistan
18 The Mortgage Markets
■ What are mortgages?
■ Characteristics of residential mortgage Lecture PLO 2 CLO 2 Knowledge
■ Types of mortgage loans
■ Mortgage lending institutions
■ Loan servicing
19 ■ Valuation of mortgage instruments (Numerical) Lecture PLO 4 CLO 4 Application & Analysis
20 The Foreign Exchange Market
■ Exchange rates in the long run
■ Exchange rates in the short run: A supply and Lecture PLO 2 CLO 2 Comprehension
demand analysis
■ Explaining changes in exchange rates
21 ■ Solving the quantitative problems Lecture PLO 4 CLO 4 Comprehension

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22 Banking and management of financial
institutions
■ The basic banking function & bank balance
sheet
Lecture PLO 2 CLO 5 Comprehension & Analysis
■ General principles of bank management
-Liquidity management
-Asset & liability management
-Capital Adequacy Management
23 The mutual fund industry
■ Basic financial intermediation function
■ Organization structure
■ Types of mutual funds (open ended & close
ended Mutual funds)
Lecture & Assignment 4
■ Ways to earn through mutual funds PLO 2 CLO 5 Comprehension & Analysis
Discussion
■ Investment objective classes of mutual funds
-equity funds, bond funds, hybrid funds
-capital & money market mutual funds
■ Conflict of interest
■ Mutual fund industry in Pakistan
24 The Investment Banks
■ Basic financial intermediation function Assignment 5
Lecture PLO 2 CLO 4 Comprehension & Analysis
■ Organization structure
■ Functions of Investment Banks

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 -Issuance, Pricing & Management of
securities
- Underwriting (Full commitment & Best
Efforts Agreements)
-Distribution of Securities
■ Role in Mergers & Acquisitions
■ Conflict of interest
25 Brokerage Firms
■ Basic financial intermediation function
■ Structure & Function
■ Types of Brokerage (Full service & Discount
Lecture &
Brokers) PLO 2 CLO 5 Comprehension & Analysis
Discussion
Savings & Loan Associations/Credit Unions
■ Objective & Intermediation Function
■ Principle-Agent Problem
■ Scope in Pakistan
26 Insurance Companies
■ Basic financial Intermediation Function
■ Fundamentals of Insurance
■ Types of Insurance
Lecture Quiz 2 PLO 2 CLO 5 Comprehension & Analysis
■ Adverse selection & Moral Hazard
■ Techniques to prevent the Moral Hazard
■ Insurance versus Takkaful Scope
■ Insurance Sector in Pakistan

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27 Pension Funds, Finance Companies & Venture
Capital Firms
■ Basic intermediation function of the Above Comprehension, Analysis,
■ Types of pension funds Lecture & Assignment 6 Synthesis
PLO 2 CLO 5
■ Regulation of Pension funds Discussion & Evaluation
■ Scope, opportunities & future of pension
funds, finance companies & Venture
Capitalists in Pakistan
28 The Conventional Versus Islamic financial
Institutions
■ Basic conceptual difference
Comprehension, Analysis,
■ Recent Trends-Clients’ shift? Lecture & Assignment 7
PLO 2 CLO 5 Synthesis
■ Future of Conventional Financial Institutions Discussion
& Evaluation
versus Islamic financial system
■ Scope & Challenges for both in the economy
of Pakistan

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