BA 441 - Financial Institutions

BA 441 – Financial Institutions

Professor Raymond M. Brooks

430 Bexell Hall, 541-737-3692

brooksr@bus.orst.edu

LEARNING OUTCOMES

Specific Learning Outcomes

1. Students will be able to explain the functions of the major financial markets including the banking system, equity markets, bond markets, mortgage markets, currency markets and derivatives markets.

2. Students will be able to evaluate the role and scope of agents in each of the financial markets or institutions.

3. Students will be able to contrast the U.S. institutions and markets with the international institutions and markets.

4. Students will be able to explain various financial assets in each of the financial markets and the institutional structure on how they are bought and sold.

5. Students will be able to explain, evaluate and critique the role of government in regulating financial markets and institutions.

COURSE OBJECTIVES

The objective of the course is to introduce students to institutions and markets that form the economic system of trading financial and real assets. The course will introduce concepts of financial theory, institutional detail, regulations, and the history of the financial markets. Students will be introduced to legal, ethical, technological, global issues facing financial managers, financial markets, and the financial assets traded in these markets. The course is designed to provide an overview of the financial world, the financial assets that are traded, and the agents that participate in the financial markets.

Course Hours: Monday - Wednesday, 10:00 a.m. to 11:50 a.m.

Office Hours: Tuesday, 3 – 4 p.m., Thursday 1 – 2 p.m. & Friday 10 – 11 a.m.

Others by appointment (please call for appointment)

Required Text: Fabozzi, Modigliani, Jones and Ferri, Foundations of Financial Markets and Institutions, Prentice Hall, Third Edition, 2001

Grading: You will prepare a research paper on a specific topic assigned during the first class. The paper will be an extension of the material from the text and provide insight into the specific topic. Later in the term when your topic matches the discussion material for the class you will make a team presentation of your topic. The paper and presentation are worth 20% of your grade each or a total of 40% of the course grade. The remaining 60% of your grade is the first exam (20%) and the final examination (40%).

Class Attendance: I expect students to be on time and present for every class. Good study habits and efficient management of time will translate into good work habits and responsible employees.

Class Preparation: Students should read the assigned chapter and look over the end of chapter questions.

ACADEMIC HONESTY: For information about academic integrity and the University's policies and procedures in this area, please refer to the Student Conduct web site at: http://www.orst.edu/admin/stucon/achon.htm and the section on Academic Regulations in the OSU Schedule of Classes.

STUDENTS WITH

DISABILITIES: Accommodations are collaborative efforts between students, faculty and Services for Students with Disabilities (SSD). Students with accommodations approved through SSD are responsible for contacting the faculty member in charge of the course prior to or during the first week of the term to discuss accommodations. Students who believe they are eligible for accommodations but who have not yet obtained approval through SSD should contact SSD immediately at 737-4098.

BA 441 – Financial Markets and Institutions

Monday - Wednesday – Bexell 320

Class Time 10:00 – 11:50 a.m.

Winter 2009

Course Outline General Topics and Reading

Date	Topic	Reading Assignment	Paper Assignment	Questions Problems
Week 1 Jan 5^th	Financial Intermediaries	Chapters 1 and 2	Sign up for Paper and Topic Discussion	Chapter 1: 7, 10 and 11 Chapter 2: 7, 8, and 10
Week 2 Jan 12^th	Role of Government and Depository Institutions	Chapters 3 and 4		Chapter 3: 2, 3, and 5 Chapter 4: 6 and 9
Week 3 Jan 19^th	Central Banks and Monetary Policy	Chapters 5 and 6	Papers Due Two Weeks before Presentation	Chapter 5: 6 and 11 Chapter 6: 1 and 2
Week 4 Jan 26^th	Insurance and Common Stock Markets	Chapter 7 and Chapters 18		Chapter 7: 8 Chapter 18: 11, 17, and 25
Week 5 Feb 2^nd	Exam 1 Wed. Jan 28^th and International Equity Markets	Chapter 19	Presentations	Chapter 19: 3, 5 (a and b only) and 14
Week 6 Feb 9^th	Treasury and Municipal Markets	Chapters 16 and 17	Presentations	Chapter 16: 4, 6, and 17 Chapter 17: 6 and 12
Week 7 Feb 16^th	Corporate Bonds and Bond Dealers	Chapters 20 and 21	Presentations	Chapter 20: 3 and 9 Chapter 21: 2 and 5
Week 8 Feb 23^rd	Mortgage Markets	Chapters 23 and 24	Presentations	Chapter 23: 6 and 12 Chapter 24: 2 and 9
Week 9 Mar 2^nd	Futures Markets, Options Markets And Applications	Chapters 26 and 27	Presentations	Chapter 26: 3, 5, 11 and 14 Chapter 27: 3, 8, 9, and 15
Week 10 Mar 9^th	Swaps & Currency Markets	Chapters 30 and 31	Presentations	Chapter 30: 2 and 7 Chapter 31: 3, 6 and 10
Mar 18th	Final Exam	Wednesday	9:30 a.m.	Bexell 320

Presentation Score Card

0 to 10 points in each Category

Content of Subject ( The depth of knowledge and coverage of the subject)
Use of Visual Aids (PowerPoint, Graphs, Charts, Exercises, etc.)
Communication with the Audience (Appropriate language, projection, eye-contact, etc.)
Introduction and Summary of Subject (Concise and clear opening, concise and effective summary)
Questions and Answers (Response to Audience Questions)

Written Paper Score Card

0 to 5 points in each Category

Within Guidelines for Written Presentation (12 point Font, Double Spaced, 6 to 8 pages)
Grammar and Sentence Structure (Paper has been edited by author and is consistent in tense and person)
Clear and Concise sentences (Paper is written for a business audience)
Content of Paper (Paper covers the essential parts of the topic)
Introduction (Clearly states the subject, scope of the paper, and the theme)
Body of the Paper (Organized to flow effectively from one paragraph to the next, one subject to the next)
Summary of the Paper (Concise but articulate summary that covers the main points of the paper or the main conclusions)
When appropriate, Tables, Charts, Graphs, or other visual aids are effectively used in paper.
References
Overall effectiveness of the paper on the subject.

TOPICS and presentation schedules…

Week Five Presentations – Equity and International Equity Markets

Papers Due January 22, 2009

1. Mapping a Trade at NYSE or NASDAQ – Changes through Time

2. The Fourth Market – Electronic Communications Networks

3. European Markets and Recent Developments

4. Global Depository Receipts (GDRs, IDRs, ADRs)

Week Six Presentations – Treasury and Municipal Bond Markets

Papers Due January 29, 2009

1. Treasury Auctions and the Secondary Treasury Markets

2. STRIPS and TIPS

3. Municipal Bond Types and Characteristics

4. Defaults on Municipal Bonds (Orange County, Washington State, etc.)

Week Seven Presentations – Corporate Borrowing

Papers Due Feb 5, 2009

1. Commercial Paper

2. Bond Ratings and Agencies

3. High Yield Bonds (Junk Bonds) and Their History

4. Bankruptcy – Procedures and Outcomes

Week Eight Presentations – Mortgage Markets

Papers Due Feb 12, 2009

1. Home Mortgages: Process, Qualifications, and Payments

2. Mortgage Designs: Fixed, Adjustable, Balloon, and Others

3. Creating the National Mortgage Market: Players and History

4. Collateralized Mortgage Obligations: History and Application

Week Nine Presentations – Futures and Options

Papers Due Feb 26, 2009

1. Getting In and Out of Future Contracts

2. Governing the Futures Markets

3. Brief History of Options Trading

4. International Developments in Futures and Options

Week Ten Presentations – Swaps and Currency Markets

Papers Due Mar 5, 2009

1. Mechanics of an Interest Rate Swap

2. Development of the Swaps Market

3. Exchange Rates and Arbitrage

4. Euro: It’s History and Future

References for Papers

BA 543

References should appear at the end of the paper on a separate sheet.

For Journal articles with single author:

Angel, James J., 1997, Tick Size, Share Price, and Stock Splits, Journal of Finance 52, 655-681.

For Journal articles with multiple authors:

Brooks, Raymond M., and Shur-Nuaan Chiou, 1995, A Bias in Closing Prices: The Case of the When-Issued Anomaly, Journal of Financial and Quantitative Analysis, 30, 441-454.

For Books:

Fama, Eugene F. and Merton Miller, 1972, The Theory of Finance (Dryden Press, Hinsdale, Illinois).

For Contributions in collective works:

Grossman, Sanford J. and Oliver D. Hart, 1982, Corporate Financial Structure and Managerial Incentives, in John J. McCall, ed.: The Economics of Information and Uncertainty (University of Chicago Press, Chicago, Illinois).

For Internet Citations with author:

Kinnel, Russel, 4/18/2002, Introducing Financial Analyst Pans, http://www.morningstar.com.

For Internet Citations from a sponsored site:

Wikipedia, 5/18/1984, Bid-offer spread, http://en.wikipedia.org/Bid-ask_spread.

For Internet Citations without author or sponsor:

4/18/2002, Stocks Pare Their Losses, http://www.money.cnn.com.

For Newspaper Citations:

Cohen, Lorrie, 2/2/1998, Credit Card Lesson Can Carry High Price, The Tucson Citizen.

Generic Citation:

Author (last name, first name), date of publication (year for books and journals, date for magazines, newspaper, and web sites), title of article or book, and publisher (name and location of publisher for a book, journal name, magazine name, newspaper, or web site).

Topic

Researcher #1

Researcher #2

Presentation

Mapping a Trade at the NYSE or NASDAQ

Hillary Everist

Jessica Sandoval

January 28, 2009

The Fourth Market – Electronic Communications Networks

Kevin Appel

Marcus Woo

February 4, 2009