The University of Hong Kong

Faculty of Business and Economics

School of Economics and Finance

Financial Markets and Institutions (FINA 0102/2230)

I. Information on Instructor

Instructor: ProfessorFrank Song

1003 KKL

Tel: 2857-8507

Website:

Text: Required:

Financial Markets and Institutions, by Frederic S. Mishkin and Stanley G. Eakins (ME), seventh edition, Pearson Education

II. Course Description and Objectives

The course examines how dofinancial markets (such as those for bonds, stocks, and foreign exchange) and financial institutions (banks, insurance companies, mutual funds, and others) work.It also discusses the role of central bank and monetary policy in the financial system.More specifically, it helps students to understand why the financialmarkets exist; how are interest rates and exchange rates determined;how to value a stock;the role of financial institutions in modern economy; and etc. It will alsodiscuss some financial news and address practical issues facing financial managers and regulators.

III. Learning Outcomes

  1. understand the basic functions of financial systems, financial markets and institutions
  2. be able to use simple economic models to explain the determinants of interest rates, stocks, and exchange rates
  3. be able to explain why do financial intermediaries exist and what is the role of financial institutions in modern economy
  4. to do a detailed research report and presentation on a local financial market or institutions, or explain how local asset prices are determined
  5. to gain understanding of key financial news

IV. Performance Evaluation

Class and tutorial performance10%

Project (due in the last week of teaching)10%

Midterm (the week after the reading week)30%

Final Exam50%

Total100%

V. Course Outlines

The course consists of following parts:

PartI.Introduction

This part discusses the basic functions of financial markets and institutions and provides an overview of the financial system

Ch. 1 and 2

Part II. Fundamentals of Financial Markets

This part covers the determinants of interest rates and exchange rates, and discusses the efficiency of financial markets

Ch. 3-6, 14

Part IV. Financial Markets

This part discusses specific financial markets such as money, bond, stock, and derivatives markets

Ch. 11-13, 24

Part III. Central Banking and Monetary Policy, and International Financial System

It covers basic structures of central banks and conduct of monetary policy and its relationship with financial system

Ch.10, 16

Part IV. Fundamentals of Financial Institutions

This part will discuss why do financial institutions exist and some of corporate governance issues in financial institutions

Ch.7-8

Part V. The Financial Institutions Industry

It covers more specific issues in financial institutions such as structure and competition of banking industry and banking regulations.

Ch. 18-19

Term Project

Students are required to form project team and finish a report of selected topics related to the contents of the course. There will be a group presentation in student’s tutorial class in the last week of teaching. A report of ppts of up to 20-25 should be submitted by the time of the presentation. Each student will be graded according to the group performance.

More specifically, students can prepare presentation on China and Hong Kong financial markets, financial institutions, market structure, regulations, corporate governance, and etc. Each group can focus on a specific market (e.g., Hong Kong’s bond market) or a specific type of financial institution (e.g., China banking industry, Hong Kong’s hedge fund industry). A comparison study of China, Hong Kong, US, and other financial systems is also a good topic.