Rift Valley University

Postgraduate Program

Study Guide Book

Course Title: Advanced Financial Institutions and Capital Markets

Course Code:
Course Hours: 3
Semester: II
Academic Year: 2020/21 G.C
Course Instructor: Elefachew Mossisa (PhD)

Course Description
This course will provide students with an understanding of the financial system in general and the
operation and structure of financial markets and institutions in particular. It will also emphasize on the
characteristics and pricing of various financial instruments including derivative instruments. It aims to
develop awareness of the theoretical and practical problems associated with different systems of financial
markets regulations. The course covers topics such as financial assets and their pricing, equity markets,
bond markets, money markets, Foreign exchange markets, mortgage markets and asset securitization,
derivative markets, financial institutions, central bank and money creation and regulation of financial
institutions and markets.

Course Objectives
After successfully completing this course, students are expected to be able to:
 Explain the role of financial system in a nation
 Understand the structure and operation of depository financial institutions
 Understand the structure and operation of non-depository financial institutions
 Understand how the central bank creates or destroys money
 Understand the characteristics and pricing of financial assets
 Discuss the different forms of financial markets and their operations and
 Describe the rational for and systems of financial regulation.
Course Content
Chapter 1: An Overview of the Financial System.
1.1 The role of financial system in the economy
1.2 Financial assets
1.3 Financial markets: role, classifications and participants
1.4 Financial Institutions
1.5 Regulation of financial systems
Chapter 2: Financial Institutions in the Financial System
2.1 Introduction
2.2 Depository financial institutions
2.2.1 Commercial Banks
2.2.2 Saving and Loan Associations
2.2.3 Credit Unions
2.2.4 Microfinance institutions
2.3. Non Depository Financial Institutions
2.3.1 Insurance companies
2.3.2 Pension funds
2.3.3 Mutual funds
2.3.4 Investment Banking Firms
Chapter 3: Central Banking System
3.1 Evolution of Central Banking
3.2 Central Banking Functions
3.3 Monetary Policy & its Objectives
3.4 The Money Supply Process
Chapter 4: Determinants of asset price and interest rates
4.1 Properties and pricing of financial assets
4.2 The level and structure of interest rates
4.3 The term structure of interest rates
Chapter 5: Financial Markets In The Financial System
5.1 Organization and Structure of Markets
 5.2 Primary and secondary markets
4.1 The Money Market
4.2 Capital Market
4.2.1 Debt Market
4.2.2 Equity Market
4.3 Foreign Exchange Markets
4.4 The Derivative Market
4.4.1 Financial futures market
4.4.2 Options markets
4.4.3 Swaps, caps, floor and credit derivatives

Teaching/Learning methods and strategies

Lecture classes, book chapter review, article review, and presentation of group practical
exercises.
Assessment

1. Group Assignment: Critical Appraisal of a Selected Area/Aspect/Feature of the

Ethiopian Financial System – Group Term Paper (30%)

Examples of topics on the Ethiopian financial system students may study:

 Assessment of the Ethiopian Financial Market
 Structure, Activities and Other Key Facts of a selected financial Industry in
Ethiopia (Banking, Insurance, Microfinance etc…)
 Regulation of Financial Institutions in Ethiopia…
Note:
 A group shall constitute of utmost 5 members. .
 Each group shall notify the instructor its members and its choice of topic
by 17th April 2020.
 All assignments are due by the end of the class.

2. Presentation of the Group Assignment (10%)

3. Review of an article from a reputable journal on the subject of Finance vis-a-vis

Globalization- Individual (20%). A separate file containing guidelines on how to
review an article is attached.
4. Final Exam (40%)
Reference:
1. Madura, Jeff. (2012) Financial Markets and Institutions. 6th Edition. The McGraw-Hill
Companies, Inc
2. Mishkin & Eakins (2012) Financial Markets and Institutions, 7e. Prentice Hall.
3. Saunders, A & Cornett M.(2001).Financial Markets and Institutions: A Modern
Perspective.2nd Ed. Mc Graw Hill
4. Bhole,M.(2004)Financial Institutions and Markets: Structure, Growth and Innovations,4th
Ed.Tata McGraw Hill/
5. Rose, P.(1989) Money and Capital Markets. 3rdEd.Richard D Irwin.
6. Rose, P.(2003), Money and Capital Markets: Financial Institutions & Instruments in a
Global Market place. Mc Graw-Hills
7. Santomero, A.M.& Babbel, D.(2001).Financial Markets, Instruments, and Institutions.
12th Ed.Irwin.
8. Websites like: www.nbe.gov.et ; www.MOFEC.gov.et

Prepared by:
Elefachew Mossisa (PhD,

Approved by:
Department Head
_________________________
College Dean
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