Financial Markets and

Institutions

Department of Finance& Investment

NUST Business School

National University of Sciences & Technology

BSA&F-2K17
Course Details

Course Title: Financial Markets and Institutions

Course Code: FIN 340 Prerequisite: Fundamentals of Financial
Management
Credit Hours: 3
Program: BSA&F-2K17 Sections: A & B

Course Faculty

Dr. Nabeel Safdar

Office: Room 313, NUST Business School, NUST H-12, Islamabad
Consultation Hours: 10:00 am – 2:30 pm (Wednesday)
Tel: 05190859160
Email: nabeel.safdar@nbs.nust.edu.pk

Course Description

This course examines the form and function of various financial markets and the manner in which
financial institutions seek to use these markets to accomplish strategic corporate objectives. Our
attention will focus on the behavior of major financial institutions, including commercial banks, and their
role in the intermediation process as suppliers of funds to the money and capital markets. In addition,
we will examine how financial institutions trade various financial claims within the capital market to tailor
their risk-return profile in order to enhance franchise value. In this course, we learn how financial
markets operate and consider the economic principles that underlie the operations of these markets.
We examine why financial intermediaries are critical to the effective functioning of financial markets.
The course will also relate theory with practice in Pakistan.

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Course Learning Outcomes (CLO)

To provide students with an introduction to the markets in which financial assets are traded the
various institutions which represent major participants in these markets, and dominant factors
within the financial environment which affect financial markets and institutions. Out attention
will focus on following CLOs:
CLO No. 1
1.1 Developing the ability to differentiate between different financial markets and different
financial institutions.

1.2. What happens to financial markets and institutions, and its importance of politicians and
elections.
1.3 to understand the role of financial markets and institutions in household daily life issues.
Understanding how the economic and regulatory environments affect the morphology of
financial markets and the operation of financial institutions.
CLO No. 2
2.1 To understand the effects of financial markets and financial intermediaries on the
economy,
2.2 understanding the general structure and operations of financial markets and financial
intermediaters.
2.3 Learn about the major financial intermediaries and the instruments that are traded in
financial markets.
2.4 Examining how and why domestic financial markets and institutions have changed through
time.
CLO No.3
3.1 To understand exactly what the phrase interest rates means.
3.2 To acquire knowledge and interpretation of the yield to maturity and accurate measure of
interest rates.
3.3 We discuss how the yield to maturity is measured on credit market instruments and how it
is used to value these instruments.
3.4 to understand that a bond’s interest rate does not necessarily indicate how good an
investment the bond is because what it earns (its rate of return) does not necessarily equal its
interest rate.
3.5 Finally, explore the distinction between real interest rates, which are adjusted for changes
in the price level, and nominal interest rates, which are not.
CLO No.4
4.1 To develop understanding of why the overall level of nominal interest rates (which we refer
to simply as “interest rates”) changes and the factors that influence their behavior.
4.2 As We learned earlier in Chapter 3 that interest rates are negatively related to the price of
bonds, so if we can explain why bond prices change, we can also explain why interest rates
fluctuate.
4.3 Here we will apply supply-and demand analysis to examine how bond prices and interest
rates change.
4.4 Identifying major contemporary issues which challenge managers within financial
institutions.

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CLO No.5
5.1 To complete the interest-rate picture by examining the relationship of the various interest
rates to one another.
5.2 Understanding why they differ from bond to bond can help businesses, banks, insurance
companies, and private investors decide which bonds to purchase as investments and which
ones to sell.
5.3 To understand the risk structure of interest rates, although risk, liquidity, and income tax
rules all play a role in determining the risk structure.
5.4 To understand the bond’s term to maturity, and the relationship among interest rates on
bonds with different terms to maturity called the term structure of interest rates.
5.5 In this chapter we examine the sources and causes of fluctuations in interest rates relative
to one another and look at a number of theories that explain these fluctuations.

CLO No.6
6.1 To understand how securities prices move over time through the efficient market
hypothesis.
6.2 to gain knowledge of the efficient market hypothesis in order to explain some puzzling
features of the operation and behavior of financial markets.
6.3 Theoretically, the efficient market hypothesis should be a powerful tool for analyzing
behavior in financial markets. But to establish that it is in reality a useful tool, we must compare
the theory with the data. Does the empirical evidence support the theory?
6.4 Acquiring a working knowledge of how financial managers are responding to these
contemporary issues, and how managerial responses are likely to change the nature of
financial markets and institutions in the future.
CLO No.7
6.1 To understanding the conduct of monetary policy and its effects on the money supply and
interest rates, level of economic activity and hence our well-being.
6.2 To explore the Federal Reserve’s balance sheet and how the tools of monetary policy
affect the money supply and interest rates.
6.3 To examine in detail how the Fed uses these tools and what goals the Fed and other
countries’ central banks establish for monetary policy.
6.4 To evaluate central banks’ conduct of monetary policy in the past, with the hope that it will
give us some clues to where monetary policy may head in the future.

CLO No.8
8.1 To review the money markets and the securities which are traded in money markets.
8.2 To understand, why the money markets are important to financial system.
CLO No.9
9.1 To understand how the capital markets operate in various securities include bonds, stocks, and
mortgages.
9.2 To understand various securities that trade in a capital market.
CLO No.10
10.1 To discuss the markets where stocks trade.
10.2 To examine the fundamental theories that underlie the valuation of stocks.
1.3 to develop an understanding of the forces that cause the value of stocks to rise and fall minute
by minute and day by day.
10.4 To determine a value for a common stock and role of volatility in the stock markets.

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CLO No.11
11.1 To understand the phenomenon of exchange rate.
11.2 To examine the exchange rates volatility and its relationship with the economy and our daily
lives, because when the U.S. dollar becomes more valuable relative to foreign currencies, foreign
goods become cheaper for Americans and American goods become more expensive for
foreigners.
11.3 To study international finance by examining the foreign exchange market, the financial
market where exchange rates are determined.
CLO No.12
12.1 To examine how banking is conducted to earn the highest profits possible
12.2 To understand how and why banks make loans, how they acquire funds and manage their
assets and liabilities (debts), and how they earn income.
CLO No.13
13.1 To understand risk and return and examine how managers of financial institutions cope with
credit risk, the risk arising because borrowers may default on their obligations, and with interest-
rate risk, the risk arising from fluctuations in interest rates.
13.2 to know the tools managers use to measure risk and the strategies they employ to reduce it.
CLO No.14
14.1 To understand the important financial derivatives that managers of financial institutions use to
reduce risk: forward contracts, financial futures, options, and swaps.
14.2 To develop knowledge, how markets for each of these financial derivatives work and how
each can be used by financial institution managers to reduce risk.
Over all
 Understand the Pakistani banking system and describe the role of regulatory bodies in
regulating how banks manage their capital.
 Describe the types of equity securities that companies can use to raise equity capital and how
these securities can be listed and traded on the Pakistan Stock Exchange.
 Apply different company valuation techniques to determine share prices.
 Describe the characteristics of different types of debt securities and be able to price them.
 Describe different theories of how interest rates are determined and explain the relationship
between the term to maturity, risk, and interest rates.
 Gain an understanding of the characteristics of derivatives instruments (futures and options
contracts), the different motivations for their use and how they are traded. Specifically you
should: • Recognise which types of futures / options contracts to use to • hedge various risk
exposures • Appreciate the various risks involved in trading derivative instruments • Describe
the factors that determine the pricing of derivative instruments.
 Possess the ability to discuss and write about the links between the theory of financial markets
and the reports in the financial press.

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Undergraduate Program Learning Goals and Objectives

General Learning Goals & Objectives BSAF Program:

1. Provide an in-depth knowledge of principal methods and techniques of accounting and
financial management.
2. Instill a structured approach in students to effectively deal with complex business issues.
3. Prepare students for the role of accounting/ finance professionals who can add value to all
areas of organization.
4. Enhance interpersonal, team building, communication and leadership skills.
5. Incorporate a sense of professional ethics and responsibility.
6. Provide hands on training in different soft wares in accounting and finance.
7. Enter into collaborative arrangements with various local and international accounting and
finance bodies.

Indicate below how the course learning objectives/outcomes specifically related to any program
learning goals and objectives.
PROGRAM LEARNING GOALS COURSE LEARNING COURSE EVALUATION
AND OBJECTIVES OBJECTIVES ITEM
Goal 1- Provide an in-depth
Students get a number of
knowledge of principal methods
opportunities to demonstrate their CP, Cases and Exam
and techniques of accounting
ability to communicate effectively
and financial management.
Goal 2- Instill a structured
approach in students to Ethical perspective in some of the Cases and exams (minor
effectively deal with complex case studies are highlighted component)
business issues
Goal 3- Prepare students for the
Major goal: Analytical thinking and CP, quizzes,
role of accounting/ finance
problem solving skills are essential assignments, cases and
professionals who can add value
for success in this course exam
to all areas of organization
Goal 4- Enhance interpersonal, Application of information
team building, communication technology in preparing cases Assignments, cases
and leadership skills analyses and assignments
Students work in groups of 4-5
Goal 5- Incorporate a sense
persons each to prepare case
of professional ethics and Cases
briefs and analyses. Most case
responsibility
settings are global and multicultural
Goal 6- Provide hands on Stata Tutorials along with Assignments

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 training in different software’s in assignments
accounting and finance.
Goal 7- Enter into collaborative
arrangements with various local Pakistan stock exchange and State
Assignments
and international accounting and Bank working
finance bodies

Course Evaluation (Grade Breakup)

Grading will be done as per NBS criteria. The breakup of the grade points is as follows:
Final Exam 40%
Midterm 25%
Final Project 10%
Quizzes 10%
Assignments 10%
Class Participation 5%
(Including Class Activities/Case Study Discussions)
Following is a summary of our expectations from you:

Please bear in mind that this is a Business School, therefore, a thorough professional approach is
expected of you.
 All mobile phones must be kept switched off during the lectures, and kept in your pockets / hand
bags.
 Students are strongly encouraged to actively participate in class discussions.
 Always be on time for the lectures as late comers are not allowed in the class. You are
expected to be in seated five to ten minutes before start of class. Late comers will be
marked absent.
 Be professionally dressed for lectures — as if you are at work.
 No food and drinks in class.
 Students are cautioned to keep the class room neat and tidy, and not to damage or write graffiti
on the chairs or elsewhere. Students can and will be fined an amount commensurate with the
seriousness of the damage caused to NUST property.
 Prepare for each lecture by reading the prescribed material-before hand.
 If you are experiencing difficulties with the course—speak with the instructor.
 There is a large amount of material to be covered in the course, so keep up to date with your
work. It will be very difficult to catch up later.
 You are in an Adult learning environment—so expect to be treated as adults.

MAKEUP QUIZZES:
 All quizzes (total of five) will be counted towards your final grade. No make-up quizzes will
be administered.

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  If you miss a quiz for an unforeseen reason, i.e., only in case of illness of the student
or death of a member of the student’s immediate family, you should contact me as
soon as you are physically able to pick up the phone and call me or email me.

 With regard to illness, a medical certificate from any hospital / clinic on the NBS
approved panel is mandatory.

Attendance
Attendance is mandatory for all class sessions. The exam department has specific criteria for
permitting students to sit for the exams depending on their attendance record. Classes are held
three hour session once each week. Less than 75% attendance will not be allowed in final exam.
Exams
All students must take the examinations on the scheduled date and time. A calculator is allowed
during exams, however a laptop is not. Students will not share calculators.
Final Project:
Groups will be formed in the first class of the semester. Each group will comprise on 5 students. The
group will submit its report two weeks prior to the start of final exam.
More detailed information regarding the final project will be shared later on in the semester.
Academic Dishonesty:
You are responsible for knowing and enacting academic conduct that is in line with the University’s
statement entitled “Academic Dishonesty” available at:
http://www.nust.edu.pk/usr/showContents.aspx?mdl=1839
The statement highlights examples of unacceptable behavior which include, but are not limited to, the
following:
 Cheating: Intentionally using or attempting to use unauthorized materials, information, or study
aids in any academic exercise; copying from another student’s examination; submitting work
prepared in advance for an in-class examination; taking an examination for another person or
conspiring to do so.
 Plagiarism: Intentionally or knowingly representing the words or ideas of another as one’s own
in any academic exercise; failure to attribute direct quotation, paraphrase, or borrowed facts or
information.

It is expected that all work that is handed will be your own. Any ideas or content that come from another
source must be properly cited (including any content taken from the Internet, books, articles and
lectures).
Moreover, Turnitin will be used as the plagiarism software to evaluate all your submissions. Any acts of
plagiarism and cheating will be dealt strictly and in accordance with the policy in place by the University.

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Course Content (Weekly)

Weekly breakdown is given below

Session Outcomes
Week Lecture No. and Topic Reading (Students should be able
to…)
1 Orientation

Module 1: Overview of financial analysis and financial forecasting

FMI Ch 1: Why Study CLO No. 1
Financial Markets & CLO No. 2
1 LECTURE 1: INTRODUCTION Institutions
FMI Ch 2: Overview of
Financial System?
FMI Ch 3: What Do

LECTURE 2: interest Rates Mean

CLO No. 3
2 FUNDAMENTALS OF and What Is Their
FINANCIAL MARKETS Role in Valuation?

LECTURE 3:
FMI Ch 4: Why Do
FUNDAMENTALS OF CLO No. 4
3 Interest Rates
FINANCIAL MARKETS
Change?

FMI Ch 5: How Do
LECTURE 4:
Risk and Term CLO No. 5
4 FUNDAMENTALS OF
Structure Affect
FINANCIAL MARKETS
Interest Rates?
LECTURE 5: FMI Ch 6: Are
5 FUNDAMENTALS OF CLO No. 6
Financial Markets
FINANCIAL MARKETS Efficient
LECTURE 6: FMI Ch 8: Conduct of
CENTRAL BANKING AND THE monetary Policy: CLO No. 7
6
CONDUCT OF MONETARY Tools, Goals, and
POLICY Targets
7 LECTURE7: FMI Ch 9: The Money CLO No. 8
FINANCIAL MARKETS Markets
FMI Ch 10: The
8 LECTURE 8: Money Markets (09 CLO No. 9
FINANCIAL MARKETS remaining) &,, The
Bond Markets
9 MID-TERM EXAM WEEK

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 LECTURE 9: FMI Ch 11: The Stock CLO No. 1o
10
FINANCIAL MARKETS Market
LECTURE 10: FMI Ch 11: The Stock CLO No. 10
11
FINANCIAL MARKETS Market
FMI Ch 13: The
LECTURE 11: CLO No. 11
12 Foreign Exchange
FINANCIAL MARKETS
Market
FMI Ch 17: Banking
LECTURE 12: THE FINANCIAL and the Management CLO No. 12
13
INSTITUTIONS INDUSTRY of Financial
Institutions
FMI Ch 24: Risk
LECTURE 13: THE FINANCIAL CLO No. 13
14 Management in
INSTITUTIONS INDUSTRY
Financial Institutions
FMI Ch 24: Risk
LECTURE 14: THE FINANCIAL CLO No. 13
15 Management in
INSTITUTIONS INDUSTRY
Financial Institutions
LECTURE 15: THE FMI Ch 25: Hedging
CLO No. 14
16 MANAGEMENT OF FINANCIAL with Financial
INSTITUTIONS Derivatives
LECTURE 16: THE FMI Ch 25: Hedging
CLO No. 14
17 MANAGEMENT OF FINANCIAL with Financial
INSTITUTIONS Derivatives
18 FINAL EXAM WEEK

Required Course Material

The required text for this course is

Text Book: Financial Markets & Institutions
Authors: Frederic S. Mishkin & Stanley G. Eakins, Pearson Education.
Edition: (7th Edition)
Reference Books:
 Frank J. Fabozzi, Franco P. Modigliani &Frank J. Jones (2010) Foundations of Financial
Markets and Institutions, 4th Edition, Pearson Education
 Financial Markets and Institutions. By Anthony Saunders & Marcia Millon Cornett 4th edition.
 Financial Institutions Management Risk Management Approach By Anthony Saunders and
Marcia Millon Cornett 6th edition.
 Money and Capital Market by Peter S. Rose Fifth Edition,
 Principles Of Money, Banking & Financial Markets By Lawrence S. Ritter,William L. Sliber and
Gregory F. Udell, 10th or later Ed

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  Financial Institutions an-d Markets , 7th Edition by Jeff Madura

Additional Recommended readings

 Reading Assignments on Current Issues in the Financial Industry in Pakistan and worldwide
 State Bank of Pakistan’s Publications
 Dawn, Business Section Economic and Business Review; Business Recorder; Pakistan
Economist etc

Dates to Remember

The dates/weeks provided in this section are a reasonable estimate of due dates for quizzes,
assignments and project related material submission. These may be subject to modification by
the instructor due to unforeseen circumstances/minor modifications in course. However, until
informed so, please consider these dates/weeks as final. (Please revise as per your
requirement)

Date Item Due

Announced Quiz No. 1

Project Titles Finalized
Assignment No. 1 (In-Class)
Announced Quiz No. 2
Assignment No. 2 Due
Announced Quiz No. 3
Announced Quiz No. 4
Written Report Submission
Group Presentations

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 Bear in mind that it is the responsibility of the student to continuously keep track of
these dates/weeks/lecture outline and any student not prepared for the class will be
marked negatively in CP as well as the relevant class activity

Do’s and Don’ts of Class

DO
Come to class on time and having completed
the reading material.
Take notes during the lectures.
Ask questions that are relevant to the topic
being discussed and participate actively in
class discussions and activities.
Let the lecturer know in advance if you need to
miss a class.
DONT
Submit assignments, quizzes late. Such
assignments and quizzes will not be accepted.
Cause disturbance in class. If you have a
question, address it to the lecturer.
Walk in and out of class during the lecture as you
please. If you have an emergency, let the lecturer
know.
Come to class without your own copy of reading
material assigned for that week.

Constantly check the deadlines that are due. Ask the lecturer to reschedule deadlines.

Constantly monitor the course outline and have

Ask the lecturer to change attendance details.
it with you at all times.

Research topics and news items for

Eat/Drink food in class.
constructive (and respectful) in-class debates.

Sample Front Page for Report/Assignments

Do Not forget to write some form of

identification on each document that is due for
Switch off/Put your phones on silent during
submission of any kind. It is not anyone’s
class.
responsibility to keep track of the author of such
documents but the author himself/herself.

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 NUST Business School

FIN-340 – Financial Markets and Institutions

Topic of Report/Assignment

Submitted to;
Dr. Nabeel Safdar
Submitted by;
xxx

BSA&F- 2K17 A/B

Date: xx Month, 2019.

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