CXC Math Grade I, II or III (Grade II Pre 1998), O'Level Maths Grade C or EC08A




ECON1007 : Elements of Banking and Finance

Course Objective

The principal objective of this course is to introduce students to the basic concepts, theories and issues involved in banking and finance. It introduces students to the established principles of bank and non bank financial management, as well as to critical aspects of financial market operations. The course will seek to explore these issues in a developing country context, with particular reference to the Caribbean . Students will be exposed to current monetary and financial information in order to improve their analytical skills, while simultaneously applying the concepts being presented.

 Specifically, at the end of the course students should be able to:

o  Explain the role of the financial system and its importance to the economy and, identify the different fields of finance.

o       Evaluate the link between the financial system and the real economy.

o       Identify and explain the role and functions, as well as the operations of Deposit-taking and non-deposit taking financial institutions. 

o       Evaluate the importance of the money market to the economy; identify the different types of markets and instruments traded within the money markets.

o       Appraise the role and functions of capital market, and its importance to the economy.

o      Differentiate among the various types of traders within derivative markets and differentiate between futures, forwards and options.

 

Prescribed Texts

Prescribed Texts

 

Textbook:

Frederic S. Mishkin & Stanley G. Eakins, Financial Markets + Institutions, 6th ed., Pearson Addison Wesley, 2006 (ME)

 

Other Material:

News Articles and Papers – From time to time, I will provide you with articles or papers of interest.

 

Texas Instruments BAII Plus Financial Calculator – Not required but highly recommended

 

 

Course Outline

 

1           Introduction – ME 1, 2, 15

·         Areas in finance

·         Role of financial markets and institutions

·         Market structures

·         Financial institutions

·         Risks faced

·         Regulation of markets and institutions

 

2           Deposit Taking Institutions – ME 17, 18, 19, 20

·         Commercial banks

·         Building societies and credit unions

·         General principles of bank management

·         Off balance sheet activities

·         Measuring bank performance

·         Bank regulation

 

 

3.      Non-deposit Taking Institutions – ME 21, 22, 23

 

·         Mutual funds

·         Insurance companies 

·         Pension funds

·         Investment banks and security dealers

 

4.      Interest Rates and Market Efficiency – ME 3, 4, 5, 6

·         Measuring interest rates

·         Changes in interest rates 

·         Risk structure of interest rates

·         Term structure of interest rates

·         Market efficiency

 

5.      Central Banks and Monetary Policy – ME 7, 8

·         Central banks around the world

·         Role of the central bank 

·         Structure and operation of the central bank

·         Goals of monetary policy

·         Tools of monetary policy

 

6.      Money and Bond Markets – ME 9, 10

·         Purpose of money markets

·         Money market instruments

·         Purpose of capital markets

·         Types of bonds

·         Bond pricing

 

7.      Stock and Mortgage Markets – ME 11, 12

·         Types of stock

·         Equity pricing

·         Types of mortgages

·         Characteristics of mortgages

·         Securitization of mortgages

 

8.      Foreign Exchange Markets – ME 13, 14

·         Foreign exchange rates

·         Exchange rate regimes

·         Role of the IMF

 

9.      Risk Management of Financial Institutions – ME 24, 25

·         Managing credit risk

·

Course Assessment

 Course Assessment

The final grade for the course will be made up of:

i.                    Two problem sets each worth 5%                                                             -           10%

ii.                  Mid-semester examination                                                                        -           30%

iii.                Final Examination                                                                                    -           60%

 

 

 

Additional Readings

Additional Readings

 

 

Bank of Jamaica - The First 40 Years, B.O.J. Blackwell, David, David S. Kidwell, Richard L. Peterson, and David A. Whidbee. Financial Institutions, Markets, and Money, John Wiley and Sons. (2004).

Bonnick, Gladstone. Storm in a Teacup or Crisis in Jamaica’s Financial Sector. Caribbean Centre for Monetary Studies, Trinidad and Tobago , (1998)

Clarke, L and D. Danns (Editors). The Financial Evolution of the Caribbean Community (1970-1996), Caribbean Center for Monetary Studies (CCMS), UWI, St Augustine, Trinidad and Tobago, (1997).


Caribbean Group for Co-operation and Economic Development (CGCED), Wider Caribbean Financial Sector Review: Increasing Competitiveness and Financial Resource Management for Economic Growth, World Bank and Caribbean Centre for Monetary Studies, May, (1998)

Germidis D, D. Kessler and R. Meghir. Financial Systems and Development: What role for the formal and informal sectors? OECD, Paris, (1991).

Kirton Claremont, Adian MacFarlane and Robert Mullings, EC10H Lecture Notes, University of the West Indies - Mona. (2004).

Mishkin, Frederic, The Economics of Money, Banking and Financial Markets, Seventh Edition, Addison Wesley. (2004).

Valdez , Stephen and Julian Wood, An Introduction to Global Financial Markets, Palgrave McMillan, (2003).

Neave, E.H. Financial Systems: Principles and Organization, Routledge, London , (1997).

Singh, Kavaljit. The Globalisation of Finance. A Citizen’s Guide. Zed Books, London , (1999).

Witter, Michael and Richard Bernal. Exchange Rate Policies and the Jamaican Economy Department of Economics, Ocassional Paper Series No.1, U.W.I., (1984).