1、Tian Fu College of SWUFE Financial Markets and Institutions,Instructor: Jay Zhang Office: To be advised E-mail: Cel: 18980772117,Useful Webpages,http:/ http:/ http:/en.wikipedia.org/wiki/ http:/ http:/ http:/ http:/www.china- http:/ 2009 Pearson Prentice Hall. All rights reserved.,1-3,TextbookFinanc
2、ial Markets and Institutions, by Frederic S.Mishkin and Stanley G.Eakins, 3rd edion 2001AssessmentAssignment: 20 % Quiz: 10 % Class Attendance 10% Classroom Performance 20% Final exam: 40 %,Chapter 1,Why Study Financial Markets and Institutions?,Copyright 2009 Pearson Prentice Hall. All rights reser
3、ved.,1-5,Chapter Preview,The evening news features a segment about interest rates, the Fed Chairman Ben Bernanke, and liquidity in credit markets.What does all this mean? Do I care about interest rates? What is “the Fed?” Will this impact my firms ability to get a bank loan?,Copyright 2009 Pearson P
4、rentice Hall. All rights reserved.,1-6,Chapter Preview,These are good questions. Of course, the answer to these questions can be found in this book. In fact, this books touches on a variety of topics, including the Fed, stocks markets, bond markets, and banks. We will begin to appreciate many exciti
5、ng issues related to these topics during the course of this term,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-7,Chapter Preview,To start, we preview subjects of interest to anyone who is a part of a productive society. We motivate how financial markets and institutions have significa
6、nt impact on important questions about our financial well-being. Topics include: Why Study Financial Markets? Why Study Financial Institutions? Applied Managerial Perspective How Will We Study Financial Markets and Institutions,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-8,Why Study
7、 Financial Markets?,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,Copyright 20
8、09 Pearson Prentice Hall. All rights reserved.,1-9,Why Study Financial Markets?,Well functioning financial markets, such as the bond market, stock market, and foreign exchange market, are key factors in producing high economic growth. We will briefly examine each of these markets, key statistics, an
9、d how we will examine them throughout this course.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-10,Why Study Financial Markets? Debt Markets & Interest Rates,Debt markets, or bond markets, allow governments, corporations, and individuals to borrow to finance activities. In this marke
10、t, borrowers issue a security, called a bond, that promises the timely payment of interest and principal over some specific time horizon. The interest rate is the cost of borrowing.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-11,Why Study Financial Markets? Debt Markets & Interest R
11、ates,There are many different types of market interest rates, including mortgage rates, car loan rates, credit card rates, etc. The level of these rates are important. For example, mortgage rates in the early part of 1983 exceeded 13%. Financing a house was quite expensive at this time.,Copyright 20
12、09 Pearson Prentice Hall. All rights reserved.,1-12,Why Study Financial Markets? Debt Markets & Interest Rates,Because interest rates are important to individuals and business, understanding the history of interest rates is beneficial. The next slide shows historical interest rates in various sector
13、s of the bond market: Long-Term U.S. Government rates, Short-Term U.S. Government rates, and corporate rates. We will study these further in several chapters, examining the types and characteristics of bonds, as well as theories on how rates are determined.,Copyright 2009 Pearson Prentice Hall. All
14、rights reserved.,1-13,Bond Market and Interest Rates,Complete list of interest rates http:/www.federalreserve.gov/releases,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-14,Why Study Financial Markets? Debt Markets & Interest Rates,For the moment, we will turn to other topics, but revi
15、sit these topics. In chapters 2, 3, 4, and 10, we will examine the role of debt markets in the economy. In chapters 3 through 5, we will examine the characteristics of interest rates.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-15,Why Study Financial Markets? The Stock Market,The st
16、ock market is the market where common stock (or just stock), representing ownership in a company, are traded. Companies initially sell stock (in the primary market) to raise money. But after that, the stock is traded among investors (secondary market). Of all the active markets, the stock market rec
17、eives the most attention from the media, probably because it is the place where people get rich (and poor) quickly.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-16,Why Study Financial Markets? The Stock Market,The next slide shows the level of the Dow Jones Industrial Average over th
18、e last 55 years. Note how volatile stock prices have been, especially over the last five years. In future chapters, we will examine the role of the stock market, as well as how prices react to information in the marketplace.,Stock Market,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-1
19、8,Why Study Financial Markets? The Stock Market,Companies, not just individuals, also watch the market. Although corporations dont typically “invest” in the market, they often seek additional funding in equity markets after going public. The success of these seasoned-equity offerings (SEOs) is very
20、dependent on the current price of the companys stock.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-19,Why Study Financial Markets? The Foreign Exchange Market,The foreign exchange market is where international currencies trade and exchange rates are set. Although most people know lit
21、tle about this market, it has a daily volume around $1 trillion!,View historical financial data and forecasts at http:/www.forecasts.org/data/index.htm,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-20,Why Study Financial Markets? The Stock Market,The next slide shows how the U.S. doll
22、ar has fluctuated in price against a basket of foreign currencies. These fluctuations matter! In recent years, consumers have found that vacationing in Europe is expensive, due to a weakening dollar relative to the Euro. When the dollar strengthens, foreign purchase of domestic goods falls, and US m
23、anufacturers experience a decreased demand for their goods.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-21,Foreign Exchange Market,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-22,Why Study Financial Markets? The Stock Market,In future chapters, we will examine how ex
24、change rates are determined in both the short- and long-run.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-23,Why Study Financial Institutions?,We will also spend considerable time discussing financial institutionsthe corporations, organizations, and networks that operate the so-calle
25、d “marketplaces.” These institutions play a crucial role in improving the efficiency of the economy. We will look at: Central Banks and the Conduct of Monetary Policy The role of the Fed and foreign counterparts Structure of the Financial System Helps get funds from savers to investors,Copyright 200
26、9 Pearson Prentice Hall. All rights reserved.,1-24,Why Study Financial Institutions?,Banks and Other Financial Institutions Includes the role of insurance companies, mutual funds, pension funds, etc. Financial Innovation Focusing on the improvements in technology and its impact on how financial prod
27、ucts are delivered Managing Risk in Financial Institutions Focusing on risk management in the financial institution.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-25,Applied Managerial Perspective,Financial institutions are among the largest employers in the U.S. and often pay high sa
28、laries. Knowing how financial institutions are managed may help you better deal with them.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-26,How We Study Financial Markets and Institutions,Basic Analytic Framework Simplified models are constructed, explained, and then manipulated to il
29、lustrate various phenomena.“Practicing Manager” cases are used to tie theoretical and empirical aspects.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-27,How We Study Financial Markets and Institutions,Basic Analytic Framework Actual articles from the Wall Street Journal reinforcing t
30、he concepts from the book, and explanations of articles, helping you develop critical skills to identify key concepts from the days news.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-28,How We Study Financial Markets and Institutions,Other features Case studies Applications and Numer
31、ical Examples Special Interest Boxes Hundred of analytical end-of-chapter problems Predicting the Future problems,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-29,Exploring the Web,Web ExerciseThe World Wide Web is an enormous resource for present and historical information. We will p
32、eriodically present web exercises to introduce some of the important locations for information, and how to use it.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-30,Exploring the Web,Web ExerciseThe next three slides (starting on page 11 in the text) show you how to (1) find historical
33、 interest rates from the Fed and save the information, (2) how to import the data into Excel, and (3) how to examine the information.,Exploring the Web,Exploring the Web,Exploring the Web,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-34,Chapter Summary,Why Study Financial Markets?: th
34、e three primary markets (bond, stock, and foreign exchange) were briefly introduced. Why Study Financial Institutions?: the market, institutions, and key changes affecting these were outlined.,Copyright 2009 Pearson Prentice Hall. All rights reserved.,1-35,Chapter Summary (cont.),Applied Managerial Perspective: the book will often present material to better understand how actual managers use the information in daily operations. How We Will Study Financial Markets and Institutions: we outlines the three key components: analytical framework, features, and web exercises.,
