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TON DUC THANG UNIVERSITY

FACULTY OF FINANCE AND BANKING


----------------------------------HoChiMinh City, . November 2015
UNDERGRADUATE DEGREE PROGRAM IN FINANCE AND BANKING
MONEY AND FINANCIAL MARKETS
1. Course: MONEY AND FINANCIAL MARKETS
2. Course Code: B01020
3. No. of credits: 4 (3.1)
4. Degree level: Bachelor in Finance and Banking
Code: 52340201
5. Time allocation:
- Theory:
45 teaching hours
- Practice :
30 teaching hours
- Self-study:
90 hours
6. Requirements:
- Prerequisite: none
- Prior-completion: English 1
- Co-requisites: Macroeconomics
7. Description:
This subject offers students with fundamental knowledge on money and financial market. It
covers following topics such as the development process of money, interest rate theory, credit,
inflation, monetary policies, monetary instruments, financial intermediaries (central bank and
commercial bank), financial markets, and instruments of the financial market. These
fundamental knowledge support student analyze various monetary and financial topics as well as
other economic issues.
8. Main objectives
- Knowledge: Providing institutional and theoretical foundations for the wide variety of
financial assets are in the modern financial market. Students will study the evolution of products,
which have been developed to meet the needs of investors and borrowers. In the review of global
financial institutions, students will evaluate their traditional roles and their readiness for the
future. One class period will be devoted to reading and understanding actual debt and equity
prospectuses from the viewpoint of the issuers as well as the potential investors.
- Skills: It is expected that students maintain a current awareness of financial and economic
events from following daily events in selected newspapers and other periodicals and from
financial market reporting on television and recommended websites.

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- Thinking: It is expected that students perceive the role and purpose of science, knowledge
through their studying and researching activities.
- Attitude and behavior: It is expected that students comply with the principles, ethics in the
scientific research.
9. Brief course content:
Chapter 1: Why Study Money, Banking, and Financial Market?
Chapter 2: An Overview of the Financial System
Chapter 3: What is Money?
Chapter 4: Understanding Interest Rate
Chapter 5: The Behavior of Interest Rate
Chapter 6: The Risk and Term Structure Interest Rate
Chapter 7: The Stock Market, the Theory of Rational Expectations, and the Efficient Market
Hypothesis
Chapter 8: Banking and the Management of Financial Institutions
Chapter 9: Central Bank
Chapter 10: The Demand for Money
Chapter 11: The Money Supply Process
Chapter 12: Tools of Monetary Policy
Chapter 13: The Conduct Of monetary Policy
10. Outcomes of the course:
Results
1
2
3
4
5
6

Understand
Remember
Apply
Analyze
Judge
Offer: none
11. Students task
The highest professional standards are expected of all students who study this course. The
collective class reputation and the value of the programs experience hinges on this. This
includes:

Being on-time and in your seat when class starts


Staying until the end of class
Being constructive to the learning environment
Being present in the class and focused on class material
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Coming prepared to contribute to the class


Communication with the lecturer
Think about this class as though it was a job, and professionalism in class is a good discipline to
prepare you for the real world.
12. Teaching materials
Textbook
[1] Frederic S.Mishkin, The Economics of Money, Banking and Financial Markets. Pearson,
2013.

Supplementary Readings
[2] Cecchetti, Schoenholtz, Money, Banking, and Financial Markets, McGraw-Hill, 2015.

Additional Readings
[3] S nh Thnh, V Th Minh Hng, Nhp Mn Ti Chnh Tin T, NXB Lao ng X
Hi, 2008.
Supplementary Readings & Lecture Slides: All supplementary readings listed in the syllabus
and lecture slides will be available on-line Library. Lecture Slides (if any) will be available
following the class. Lecture Slides are meant as an outline to reduce the amount of rote copying
of definitions and formulas but certainly not as a self-contained lecture summary. Reading the
lecture slides without attending class will most likely be of little benefit.
13. Assessment scheme
On-going assessment:
- Process point 1: 10%
- Process point 2: 20%
- Mid-term test:
20%
- Final Exam:
50%
Completion Criteria: Final Result >=5
14. Scoring scale: 10 points

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15. Schedule: (T: Theory, E: Exercise, P: Practice, D: Discuss)


Session

Content

Organization of teaching

Self-

study

Outcomes

Student's task

Chapter 1: Why Study Money,

At class: None

Banking, and Financial Market?

Preparation

1.1 Why Study Financial Market?

Reading:

- The bond market and Interest Rate

[1] chapter 1 (P3-P12)

- The Stock Market

[3] chapter 2 (P19-P45)

1.2 Why Study Financial Institution

After class

and Banking?

Reading and Assignments:

- Structure of the Financial System

- The questions and problems at the end

- Financial Crisis
1

Requirement

Bank

and

Other

Financial

[1] - [3]

2.5

0.5

[1] - [4]

of the chapter.

Institutions
- Financial Innovation
1.3 Why Study Money and Monetary
Policy?
- Money and Business Cycles
- Money and Inflation
- Money and Interest Rate
- Conduct of Monetary Policy
2

- Fiscal Policy and Monetary Policy


Chapter 2: An Overview Of The

At class

- Discussion of previous problems


- Discussion of the Vietnamese Money
Financial System
2.1 Function of Financial Markets
2.2 Structure of Financial Markets

Market Instruments

- Debt and Equity Markets

Reading :

- Primary and secondary Markets

[1] chapter 2 (P25-P30)

- Exchange and Over- The Counter

[3] chapter 10 (P236-P257)

Markets

After class

- Money and Capital Markets

Reading and Assignments:

Preparation

2.3 Financial Market Instruments

- Following the Financial News: Money

- Money Market Instruments

Market Rates

- Capital Market Instruments

- Following the Financial News: The

2.4 Types of Financial Intermediaries

Capital Market Interest Rate

- Depository Institutions

- Following the Financial News:

- Contractual Savings Institutions

Foreign Stock Market Indexes

- Investment Intermediaries
2.5

Regulation

of

the

- Global: Are U.S Capital Market


Losing Their Edge?

Financial

System

Chapter 3: What is Money?


3.1 Meaning of Money
3.2 Function of Money
- Medium of Exchange

- The questions and problems at the end


of the
2.5

0.5

[1] - [4]

At class:
- Discussion of previous problems
- Discussion of the Vietnamese EPage 5 of 18

- Unit of Account

Money

- Store of Value

Preparation

3.3 Evolution of Payment System

Reading:

- Commodity Money

[1] chapter 3 (P53-P57)

- Fiat Money

[3] chapter 2 (P19-P45)

- Checks

After class

- Electronic Payment

Reading and Assignments:

- E- money

- The questions and problems at the end

3.4 Measuring money


4

Chapter 4: Understanding Interest

2.5

0.5

[1] - [4]

of the chapter.
At class:

Rate

- Discussion of previous problems

4.1 Measuring Interest Rate

- Discussion of the Vietnamese interest

- Present Value

rates

- Four types of Credit Market

Preparation

Instrument

Reading:

- Yield Maturity

[1] chapter 4 (P67-P89)

4.2 The Distinction Between Interest

[3] chapter 4 (P69-P99)

Rate and Return

After class

- Maturity and the Volatility of Bond

Reading and Assignments:

Return: Interest Rate Risk


- Summary
4.3 The Distinction Between Real and

Application: Simple Present Value


Application:
- Yield to Maturity On a Simple Loan
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- Yield to Maturity and Yearly Payment

Nominal Interest

on a Fixed Payment Loan

- Application: Calculating Real

- The questions and problems at the end

Interest Rates

of the chapter.

Chapter 5: The Behavior of Interest

2.5

0.5

[1] - [4]

At class:

Rate

- Discussion of previous problems

5.1 Determinant of Asset Demand

- Discussion of those risk effects on the

- Wealth

Vietnamese interest rates

- Expected Return

Preparation

- Risk

Reading:

- Liquidity

[1] chapter 5 (P91-P115)

- Theory of Asset Demand

[3] chapter 4 (P69-P99)

5.2 Supply and Demand in the Bond

After class

Market.

Reading and Assignments:

- Demand Curve
- Supply Curve
- Market Equilibrium
- Supply and Demand Analysis

Application:
- Changes in the Interest Rate Due to
Expected

5.3 Changes in Equilibrium Interest


Rate
- Shifts in the Demand for Bond
- Shifts in the Supply for Bond
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5.4 Supply and Demand in the Market


Money: The Liquidity Preference
Framework
5.5 Change in Equilibrium Interest
Rate in the Liquidity Preference
Framework
- Shifts in the Demand for Money
- Shifts in the Supply of Money
- Changes in Income
- Changes in the Price level
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- Changes in the Money Supply


Chapter 6: The Risk and Term

2.5

0.5

[1]-[4]

At class:

Structure Interest Rate

- Discussion of previous problems

6.1 Risk Structure of Interest Rate

- Discussion those risks of bonds,

- Default Risk
- Liquidity
- Income Tax Considerations
6.2 Term Structure of Interest Rate
- Expectation Theory
- Segmented Market Theory
- Liquidity Premium and Preferred
Habitat Theories
- Evidence on the Term Structure

shares and their relations with interest


rates of market
Preparation
Reading:
[1] chapter 6 (P123-P144)
[2] chapter 7 (P162-P188)
[3] chapter 4 (P69-P99)
After class

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Reading and Assignments:


- The Following the Financial News:
Yield Curves
- FYI: The Yield Curve as a Forecasting
tool for Inflation and the Business
Cycle
- The questions and problems at the end
7

Chapter 7: The Stock Market, the

[1]-[4]

of the chapter.
At class

Theory of Rational Expectations,

- Discussion of previous problems

and the Efficient Market Hypothesis

Preparation

7.1 The Stock Exchange in Vietnam

Reading:

- Ho Chi Minh Stock Exchange

[1] chapter 7 (P147-P165)

- Hanoi Stock exchange

[2] chapter 8 (P189-P208)

7.2 The process of trading in the share

[3] chapter 8 (P89-P208)

market

After class

- Definition

Reading and Assignments:

- Transaction Technique
- Transaction Process
- Transaction Modes
- Type of Transaction Order
- Transaction Order

- Application: The Subprime Financial


Crisis and the Stock Market
- Application: Practical Guide to
Investing in the Stock Market
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7.3 The Theory of Rational


Expectations

- The questions and problems at the end

- Formal Statement of the Theory

of the chapter.

- Rationale Behind the Theory


- Implications of the Theory
8

7.4 The Efficient Market Hypothesis


Chapter 8:
Banking And The
Management

of

Financial

Institutions
8.1 The Bank Balance Sheet
- Liabilities
- Assets
8.2 Basic Banking
8.3 General Principles Of Bank
Management
- Liquidity Management and the Role

2.5

0.5

[1]-[4]

At class
- Discussion of previous problems
- Discussion of the Commercial Banks
in Vietnam
Preparation
Reading:
[1] chapter 10 (P225-P235)
[3] chapter 11 (P264-P292)

of Reserves
- Asset Management
- Liability Management
- Capital Adequacy Management
8.4 Managing Credit Risk
- Screening and Monitoring
- Long-Term Customer Relationships
- Loan Commitments
- Collateral and Compensating

After class

Balances
- Credit Rationing
8.5 Managing Interest Rate Risk

- The questions and problems at the end

Reading and Assignments:


- Application: Strategy for managing
Bank Capital
- Application: Strategies for managing
Interest- Rate Risk
of the chapter.
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- Gap and Duration Analysis


8.6 Off Balance Sheet Activities
- Loan Sales
- Generation of Fee Income
Chapter 9: Central Bank

2.5

0.5

[1]-[4]

At class

9.1 The Price Stability Goal and the

- Discussion of previous problems

Nominal Anchor

- Discussion of the State Bank of

- The Role of a Nominal Anchor

Vietnam.

- The Time inconsistency Problem

Preparation

9.2 Other Goals of Monetary Policy

Reading:

- High Employment

[1] chapter 13 (P315-P341)

- Economic Growth

[2] chapter 15 (P394-P412)

- Stability of Financial Markets

[3] chapter 6 (P122-P132)

- Interest-Rate Stability

After class

- Stability in Foreign Exchange

Reading and Assignments:

Markets
9.3 Should Price Stability Be the
Primary Goal of Monetary Policy?

- The questions and problems at the end


of the chapter.

- Hierarchical Versus Dual Mandates


- Price Stability as the Primary, LongRun Goal of Monetary Policy
9.4 Origins of the Federal Reserve
System
9.5 Structure of the Federal Reserve
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System
- Federal Reserve Banks
- Member Banks
- Board of Governors of the Federal
Reserve System
9.6 How Independent is the Central
10

Bank?
Chapter 10: The Demand for Money

[1]-[4]

At class

10.1 Quantity Theory of Money

- Discussion of previous problems

- Velocity of Money and Equation of

Preparation

Exchange

Reading:

- Quantity Theory

[1] chapter 19 (P499-P518)

- Quantity Theory of Money Demand

[2] chapter 20 (P553-P571)

10.2 Is Velocity a Constant.

[3] chapter 5 (P100-P120)

10.3 Keyness Liquidity Preference

After class

Theory

Reading and Assignments:

- Transactions Motive
- Precautionary Motive
- Speculative Motive
- Putting the Three Motives Together

- Key Terms
- The questions and problems at the end
of the chapter.

10.4 Further Developments in the


Keynesian Approach
- Transactions Demand
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- Precautionary Demand
- Speculative Demand
10.5 Friedman's Modern Quantity
Theory of Money
10.6 Distinguishing Between the
Friedman and Keynesian Theories
10.7 Empirical Evidence on the
Demand for Money
- Interest Rates and Money Demand
11

- Stability of Money Demand


Chapter 11: The Money Supply

[1]-[4]

At class

Process

- Discussion of previous problems

11.1 Three Players in the Money

Preparation

Supply Process

Reading:

11.2 The Feds Balance Sheet

[1] chapter 14 (P345-P370)

- Liabilities

[2] chapter 17 (P450-P473)

- Asset

[3] chapter 5 (P100-P120)

11.3 Control of the Monetary Base

After class

- Federal Reserve Open Market

Reading and Assignments:

Operations
- Shifts from Deposits into Currency
Discount Loans

- The questions and problems at the end


of the chapter.

- Other Factors That Affect the


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Monetary Base
- Overview of the Feel's Ability to
Control the Monetary Base
11.4 Multiple Deposit Creation: A
Simple Model
- Deposit Creation: The Single Bank
- Deposit Creation: The Banking
System
- Deriving the Formula for Multiple
Deposit Creation
- Critique of the Simple Model
11.5 Factors that Determine the
Money Supply
- Changes in the Non borrowed
Monetary Base
- Changes in Borrowed Reserves, BR,
from the Feel
- Changes in the Required Reserve
Ratio, r
- Changes in Currency Holdings
- Changes in Excess Reserves
11.6 Overview of the Money Supply
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Process
11.7 The Money multiplier
- Deriving the Money Multiplier
- Inflation Behind the Money
Multiplier
- Money Supply Response to Changes

12

in the Factors
Chapter 12: Tools of Monetary

At class

Policy

- Discussion of previous problems

12.1 The Market for Reserves and the

- Discussion of the Vietnamese

Federal Funds Rate

monetary policy tools

- Demand and Supply in the Market

Preparation

for Reserves

Reading:

- How Changes in the Tools of

[1] chapter 15 (P373-P384)

Monetary Policy Affect the Federal


Funds Rate
- Limit Fluctuations in the Federal
Funds Rate

2.5

0.5

[3] chapter 6 (P138-P148)


After class
Reading and Assignments:

12.2 Open Market Operations

- The questions and problems at the end

- A Day at the Trading Desk

of the chapter.

- Advantages of Open Market


13

Operations
12.3 Discount Policy

At class
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- Operation of the Discount

- Discussion of previous problems

- Lender of Last Resort the Subprime

- Discussion of the Vietnamese

Financial Crisis

monetary policy tools

- Advantages and Disadvantages of

Preparation

Discount Policy

Reading:

12.4 Reserve Requirements

[1] chapter 15 (P384-P392)

- Disadvantages of Reserve

[3] chapter 6 (P138-P148)

Requirements as a Policy Tool

After class

- Monetary Policy Tools of the

Reading and Assignments:

European Central Bank

14

- Open Market Operations

- The questions and problems at the end

- Lending to Banks

of the chapter.

- Reserve Requirements
Chapter 13: The Conduct Of

[1]-[5]

At class

monetary Policy

- Discussion of previous problems

13.1 Monetary Targeting

Preparation

- Monetary Targeting in Different

Reading:

Countries

[1] chapter 16 (P395-P403)

- Advantages of Monetary Targeting

[3] chapter 6 (P138-P148)

- Disadvantages of Monetary

After class

Targeting
13.2 Inflation Targeting
- Inflation Targeting in Different

Reading and Assignments:


- The questions and problems at the end
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Countries
- Advantages of Inflation Targeting

of the chapter.

- Disadvantages of Inflation Targeting


13.3 Monetary Policy With an Implicit

At class

Nominal Anchor

- Discussion of previous problems

- Advantages of the Just Do It"

Preparation

Approach

Reading:

- Disadvantages of the Just Do It"


15

[1] chapter 16 (P403-P426)


3

Approach

[1]-[4]

[3] chapter 6 (P138-P148)

13.4 Tactics: Choosing the Policy

After class

Instruments

Reading and Assignments:


- The questions and problems at the end
of the chapter.

3. Description of Evaluation
Evaluation
Category
Process point 1

Process point 2

Weight
10%

20%

Duration

Type of questions

In class (depend

Random Exercises + Multiple

on lecturer)

choice questions

In class (depend
on lecturer)

Presentation + Team Projects

Number of questions
At least 2 exercises

Scope of knowledge and skill of


questions
Integration of studied knowledge and

At least 2 exercises or

skills of chapters from 1 to 13


Integration of studied knowledge and

speech the small

skills of chapters from 1 to 13

paper
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Mid-term test
Final exam

20%
50%

30 - 45 minutes
60 - 90 minutes

Multiple choice questions

At least 30 questions

Integration of studied knowledge and

Multiple choice questions +

skills of chapters from 1 to 5


At least 20 questions Integration of studied knowledge and

Exercises

and 2 exercises

Ging vin bin son

skills of chapters from 1 to 13

Chu trch nhim khoa hc


Trng Khoa

NCS. Nguyn Duy Su


Ging vin c li, phn bin

Kim sot so snh mu


Trng phng o to

NCS. Nguyn Gia ng


Kim sot chuyn mn
Trng B mn

NCS. Nguyn Duy Su

Ph chun ca Ch tch hi ng khoa hc v o to


Ngy

thng

nm

GS. L VINH DANH

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