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Module 1 Importance and Introduction To Financial Markets

This document provides information about a course titled "Financial Markets". The course is a 3-unit introduction to financial markets and investment instruments like bonds, stocks, and derivatives. Students will learn about various investment alternatives and how these instruments work. The grading will be based on midterm, finals, class participation, and a final project. References include textbooks on capital markets, financial management, and technical analysis.

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Jasmine Lim
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210 views

Module 1 Importance and Introduction To Financial Markets

This document provides information about a course titled "Financial Markets". The course is a 3-unit introduction to financial markets and investment instruments like bonds, stocks, and derivatives. Students will learn about various investment alternatives and how these instruments work. The grading will be based on midterm, finals, class participation, and a final project. References include textbooks on capital markets, financial management, and technical analysis.

Uploaded by

Jasmine Lim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Introduction to

Financial Markets

BACC3A MWF 10:10 AM to 11:30 AM

Mr. James Dane T. Adayo


Course Title: Financial Markets
Course Code: ACCT314A
No. of Units: Three (3) units
Schedule: MWF 10:10AM – 11: 30 AM
Professor: James Dane T. Adayo
Email: [email protected]
COURSE DESCRIPTION
ACCT314A (Financial Markets) is a 3-unit subject that aims to introduce students to the world of
money and investing.

The course will expose students to the various investment instruments available in the market i.e.
bonds, stocks, derivatives and others.

At the end of the course, the students are expected to familiarize themselves with various
investment alternatives and enable them to understand how these instruments work.

This course is an introduction to asset pricing and capital markets, designed to help students
understand the economic concepts and financial theory necessary for analyzing investments.
GRADING SYSTEM AND REFERENCES

Midterm 30%
Finals 30%
Class Standing 20%
Final Product 20%
TOTAL 100%
REFERENCES:
Capital Markets, Financial Management, and Investment Management by Fabozzi, 2018 ed.
Technical Analysis of Financial Markets, Murphy, 2018
Other related textbooks or materials
COURSE DESCRIPTION
ACCT314A (Financial Markets) is a 3-unit subject that aims to introduce students to the world of
money and investing.

The course will expose students to the various investment instruments available in the market i.e.
bonds, stocks, derivatives and others.

At the end of the course, the students are expected to familiarize themselves with various
investment alternatives and enable them to understand how these instruments work.

This course is an introduction to asset pricing and capital markets, designed to help students
understand the economic concepts and financial theory necessary for analyzing investments.
Rationale in Studying Financial Market Institutions
a. Financial markets help to efficiently direct the flow of savings and investment in the economy in
ways that facilitate accumulation of capital and the production of goods and services.

The combination of well-developed financial markets and institutions, as well as a diverse array of
financial products and instruments, suits the needs of borrowers and lenders and therefore the
overall economy.

b. Financial markets (such as those that trade stocks or bonds), instruments (from bank CDs to
futures and derivatives), and institutions (from banks to insurance companies to mutual funds
and pension funds) provide opportunities for investors to specialize in particular markets or
services, diversify risks, or both.

Together financial markets and financial institutions contribute to economic growth; the relative mix
of the two does not appear to be an important factor in growth.
Rationale in Studying Financial Market Institutions
Large financial markets with lots of trading activity provide more liquidity for market participants than
thinner markets with few available securities and participants and thus limited trading opportunities.

Many financial assets are liquid; some may have secondary markets to facilitate the transfer of
existing financial assets at a low cost.
Why are financial markets and institutions important?
• Financial markets play a critical role in the accumulation of capital and the production of goods
and services. The price of credit and returns on investment provide signals to producers and
consumers—financial market participants.

Those signals help direct funds (from savers, mainly households and businesses) to the
consumers, businesses, governments, and investors that would like to borrow money by
connecting those who value the funds most highly (i.e., are willing to pay a higher price, or
interest rate), to willing lenders.

. In a similar way, the existence of robust financial markets and institutions also facilitates the
international flow of funds between countries.
Why are financial markets and institutions important?
• In addition, efficient financial markets and institutions tend to lower search and transactions costs
in the economy. By providing a large array of financial products, with varying risk and pricing
structures as well as maturity, a well-developed financial system offers products to participants
that provide borrowers and lenders with a close match for their needs.

Individuals, businesses, and governments in need of funds can easily discover which financial
institutions or which financial markets may provide funding and what the cost will be for the
borrower.

. This allows investors to compare the cost of financing to their expected return on investment,
thus making the investment choice that best suits their needs. In this way, financial markets direct
the allocation of credit throughout the economy—and facilitate the production of goods and
services
What happens without well-developed financial markets?
• In many developing nations, limited financial markets, instruments, and financial institutions, as
well as poorly defined legal systems, may make it more costly to raise capital and may lower the
return on savings or investments.

Limited information or lack of financial transparency mean that information is not as readily
available to market participants and risks may be higher than in economies with more fully-
developed financial systems.

In addition, it is more difficult to hold a diversified portfolio in small markets with only a limited
selection of financial assets or savings and investment products.

In such thin financial markets with little trading activity and few alternatives, it may be more
difficult and costly to find the right product, maturity, or risk profile to satisfy the needs of
borrowers and lenders.
Why study financial Markets and institutions?

• Financial markets, such as bond and stock markets, are crucial in our economy.

• These markets channel funds from savers to investors, thereby promoting economic efficiency.

• Market activity affects personal wealth, the behavior of business firms, and economy as a whole

• Financial Institutions are the institutions that make financial markets work

•“Financial Institutions are the intermediaries that take funds from the people who save and lend it to
people who have productive investment opportunities”.

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