Financial Markets And Systems
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Financial markets and systems 1
About the course • What to read? 1. Howells, P. – Bain, K.: Financial Markets and Institutions, 4. ed. Prentice Hall, 2004. 2. PPT presentations
• How to get credits? 1. Preparing and presentation of paper on selected financial market (part of FM) in particular country (40%) – in PowerPoint presentation; 2. Passing the test (60%)
Structure and topics in the course 1. Financial system – introduction to financial markets (1, 2) 2. Deposit-taking and non-deposit-taking institutions (3, 4) 3. Money market (5) 4. Capital market (6) 5. Foreign exchange market (8) 6. Derivatives market (9) 7. International capital market (10) 8. Government borrowing and financial market; regulation of financial market (11, 12)
Financial system... ...set of markets, individuals and organizations which trade in those markets and the supervisory bodies responsible for their regulation • main desire: • lend and/or borrow • ways of lending/borrowing: (1) directly; (2) organised market; (3) intermediaries
Key features of financial system • funds flow from lenders to borrowers • creating liquidity and money • providing a payments mechanism • providing financial services • portfolio management
1. Financial institutions • Financial institution as a firm – similarities and differences to non-financial company • Financial institution as intermediary – creation of assets and liabilities • Liquidity aspects: – – –
time risk (default, capital, income, reinvestment) cost
Functions of financial intermediaries:
• maturity transformation • risk transformation and
diversification • reduction in transaction costs
2. Financial markets ...organisational framework within which financial instruments can be bought or sold. • financial instruments – part of claims • supply and demand for FI
3. Lenders and borrowers • ultimate lending and ultimate
borrowing • lenders (saving) – min. risk and max. return • borrowers – min. costs, max. time period • wealth!
The financial system and the real economy • real economy – consists of firms, households
and others engaged in the production of goods and services (for present or future consumption) Interaction between FS and the real economy: • FS and national income • FS and the level of aggregate demand • The composition of aggregate demand • FS and resource allocation
About the course • What to read? 1. Howells, P. – Bain, K.: Financial Markets and Institutions, 4. ed. Prentice Hall, 2004. 2. PPT presentations
• How to get credits? 1. Preparing and presentation of paper on selected financial market (part of FM) in particular country (40%) – in PowerPoint presentation; 2. Passing the test (60%)
Structure and topics in the course 1. Financial system – introduction to financial markets (1, 2) 2. Deposit-taking and non-deposit-taking institutions (3, 4) 3. Money market (5) 4. Capital market (6) 5. Foreign exchange market (8) 6. Derivatives market (9) 7. International capital market (10) 8. Government borrowing and financial market; regulation of financial market (11, 12)
Financial system... ...set of markets, individuals and organizations which trade in those markets and the supervisory bodies responsible for their regulation • main desire: • lend and/or borrow • ways of lending/borrowing: (1) directly; (2) organised market; (3) intermediaries
Key features of financial system • funds flow from lenders to borrowers • creating liquidity and money • providing a payments mechanism • providing financial services • portfolio management
1. Financial institutions • Financial institution as a firm – similarities and differences to non-financial company • Financial institution as intermediary – creation of assets and liabilities • Liquidity aspects: – – –
time risk (default, capital, income, reinvestment) cost
Functions of financial intermediaries:
• maturity transformation • risk transformation and
diversification • reduction in transaction costs
2. Financial markets ...organisational framework within which financial instruments can be bought or sold. • financial instruments – part of claims • supply and demand for FI
3. Lenders and borrowers • ultimate lending and ultimate
borrowing • lenders (saving) – min. risk and max. return • borrowers – min. costs, max. time period • wealth!
The financial system and the real economy • real economy – consists of firms, households
and others engaged in the production of goods and services (for present or future consumption) Interaction between FS and the real economy: • FS and national income • FS and the level of aggregate demand • The composition of aggregate demand • FS and resource allocation
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