Plan of Lectures and Course Description

EXC 3670 Financial Markets and Institutions

Fall 2016
BI Norwegian Business School
Instructor:
Office:
Telephone:
Email:

Barbara A. Bukhvalova
B4-066
+47 4641 0501
Barbara.Bukhvalova@bi.no

Office hours: Wednesday, 12.302pm

(if not in B4-066, check B4-157;
if lost, give me a call)
1. Course Description
Valuable lessons have emerged from recent turmoils in world financial
markets: citizens welfare across the globe depends on the orderly conversion
of savings into real investments. Financial market intermediation of capital
transforms income into consumption across time and potential future
economic outcomes: debt and equity securities payouts allow separation of
income and consumption.
Our goal is to gain an appreciation of the importance of well-functioning
financial markets, as well as proficiency in financial market theoryan
objective whose relevance to future captains of finance is clearly beyond
questioning.
For those who plan to have a career outside of finance, the course provides an
invaluable insight into major classes of financial institutions, everyone has to
deal with during their lifetimes.
2. Outline of Key Topics
Introduction to Financial Markets
Interest rates and their determinants
Importance of interest rates for asset pricing
Debt: Bonds and Mortgages
Security issuance: Debt and equity
Mutual Funds and Pension Funds
3. Prerequisites
Basic finance: EXC 2110; Statistics: EXC 2904; Mathematics: EXC 2910
4. Reading Assignments
All assignments must be completed prior to each lecture. This will prove to
be essential in understanding complex examples of theory applications.
1

Primary Text: Anthony Saunders and Marcia Millon Cornett (2015)

Financial Markets and Institutions. McGraw-Hill Irwin, international edition:
chapters 13, 610, and 1618.
Secondary Text: Bodie, Zvi, Alex Kane, Alan J. Marcus (2013) Essentials of
investments. McGraw-Hill, 9th ed.
Other: Benninga, Simon. Financial modeling. Editions: 24 (if you plan to
join the MSc program, go for the 3rd or later only). Cambridge, Mass. : MIT
Press. Chapters 812 (711 in the 2nd edition) cover Markowitz
mean-variance efficient-set mathematics and Excel implementation.
Subsequent chapters cover topics such as VaR (Value at Risk), options,
bond-duration, the term-structure of interest rates, data tables, and matrix
algebra. Basic financial and statistical functions (including regression
analysis) are also covered. Working with Benninga book will also indirectly
help to work with Bloomberg Excel API more confidently.
Additional materials may be added as the course progresses.
5. Evaluation
The final grade has the following components:
First (Bloomberg) homework: 20%
Second homework: 10%
Final Examination: 70%
Class attendance is not compulsory, but it is the students responsibility to obtain
all information provided in class. There are no special resources provided to
students who miss class(es). Electronic resources are not designed as a substitute
for class attendance.
Makeup exams are only possible the next time the course is held. Since the course
evaluation consists of different elements, the whole course must be re-evaluated, if
a student wants to retake an exam.
While I try to resolve all of the unnecessary uncertainty in this course description,
there will always be changes as the semester progresses.
I make regular course announcements through the ItsLearning page. Please read
them!
6. Special Dates during the Semester
September 30, 9amHomework 1 instructions made available via ItsLearning
October 7, 12pmElectronic submission deadline for Homework 1
November 11, 9amHomework 2 made available via ItsLearning
November 18, 12pmElectronic submission deadline for Homework 2
December 13, 9am12pmFinal exam
7. Detailed Topics Outline
Topic 1 Introduction to financial markets
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 Chapter 1
Topic 2 Interest rate determinants
Chapter 2
Topic 3 Interest rates and security valuation
Chapter 3
Topic 4 Bonds and debt issuance
Chapter 6
Topic 5 Mortgages
Chapter 7
Topic 6 Equity
Chapter 8
Topic 7 Securities firms and investment banks
Chapter 16
Topic 8 Foreign exchange markets
Chapter 9
Topic 9 Derivatives markets
Chapter 10
Topic 10 Mutual fund industry
Chapter 17
Topic 11 Pension funds
Chapter 18