Parkes' Financial Institutions and Markets Assignments Page
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Course Assignments and Tentative Outline:
Week 9
March 1, 2011 - Continue Chapter 23: Hedging with Financial Derivatives I: Fowards and Futures
- Chapter 23: Hedging with Financial Derivatives I: Fowards and Futures
March 3, 2011 - Finish Chapter 23 and Begin Chapter 24: Hedging with Financial Derivatives II: Options and Swaps
Futures Homework is due at the beginning of the period.
- Bring your calculators today!! - Tutorial on Options Today - Homework assigned
- Options and Swaps Homework, Due Tuesday, March 8, 2011!
- Homework on futures markets and hedging. Hint: remember the numbers are already in 100s!
- Day 17 PPT - Credit Default Swaps Primer
- Chapter 23: Continued
- Chapter 24: Options (notice ONE PPT - One Chapter in the 6th Edition)
- Strike Price
- American versus European Options
- Option Contracts: Puts versus Calls
- Swaps and Credit Derivatives
- Credit Derivatives
- As Warren Buffet says: Are Credit Derivatives a time bomb?
Week 10
March 8, 2011 - Chapter 22: Risk Management in Financial Institutions
Options Homework is due at the beginning of the period.
- Chapter 24: Finish Options
- Credit Derivatives
- As Warren Buffet says: Are Credit Derivatives a time bomb?
- Chapter 22: Risk Management in Financial Institutions
March 10, 2011 - Chapter 19: Insurance Companies and Pension Funds
- Chapter 19: Insurance Companies and Pension Funds
Final Exam: Covers All Chapters, March 21, 2011 at 11:45 - 13:45
PAST ASSIGNMENTS:
Corrections of the Midterm Exam are DUE at the beginning of class for 10 points!
- Chapter 15: The Banking Firm and Bank Management
- Basic Operation of a Bank
- T-Account - Changes in the Balance Sheet ONLY
- The Bank Balance Sheet - Know the Basic 4 Assets and 4 Liabilities!
- Deposit Outflows and Reserves
- General Principles of Bank Management
- Liquidity Management
- Asset Management
- Liability Management
- Capital Adequacy Management - ROA Versus ROE and EM
Measuring a Bank's Performance
Operating Income
Operating Expenses
Mishkin Chapter 15 PPT - Bank Management
Day 14 PPT - Bank Management - Presented In Class First.
Interesting thoughts from the Economist Magazine:
February 23, 2011 - Chapter 13: Fixed Exchange Rates and Review Chapter 12! - Begin Chapter 23: Hedging with Financial Derivatives I: Fowards and Futures
Week 7
January 11, 2011 - Chapter 12: Foreign Exchange Markets - Short-Run
- Chapter 12: Foreign Exchange Markets - Long Run
- Bring your calculators today!!
- Two potential websites to help:The CIA website and Econstats
Mishkin Chapter 12 PPT - Foreign Exchange Markets
Chapter 12: Foreign Exchange Markets
- What are Exchange rates? - Prices!
Exchange Rates in the Long-Run
The Law of One Price
Purchasing Power Parity
Factors affecting Long-Run Exchange Rates
- Relative Prices
- Tariffs and Quotas
- Preferences
- Productivity
Exchange Rates in the Short-Run
Equilibrium in the Foreign Exchange Market
Expected Returns - Domestic versus Foreign
The Interest Parity Condition
Equilibrium in the Foreign Exchange Market
Explaining Changes in Exchange Rates
Day 12 PPT - The Yuan (1950 - 2008)
January 13, 2011 - Finish Chapter 12
- Review the Midterm Exam - 1st Class period
- Chapter 12: Foreign Exchange Markets
- Exchange Rates in the Short-Run
- Equilibrium in the Foreign Exchange Market
- Expected Returns - Domestic versus Foreign
- The Interest Parity Condition
- Equilibrium in the Foreign Exchange Market
- Explaining Changes in Exchange Rates
- The Exchange Rate Overshooting Model
Day 13 PPT - FOREX Thoughts, FYI
Week 6
January 4, 2011 - Finish Chapter 11: Mortgages
- Chapter 11: Mortgage Investments continued
- PMI
- Mortgage Loan Amortization
- Computing the Payment on a Mortgage
- Mishkin Pages on FF: Pages 393, 394,
395, 396, 397, 398.
Also Day 11 PPT - Fed Funds
- Mortgages continued - Today's mortgage market
Wednesday, January 5 at 6:00 pm will be the Midterm Exam! Rooms 2112 and 2212
Week 5
December 28, 2010 - Finish Chapter 10: Stock and Bond Discussions
- Problem Set 3 due at the beginning of class today!
- Notice in Edition 5 of Mishkin's Textbook, Chapter 11: Stock Markets, is a separate chapter, therefore Chapter 11 PPT discusses Stocks.
- Chapter 10 continued - Capital Market Financial Instruments
Decemeber 30, 2010 Finish Chapter 10: Stocks and begin Chapter 11: Mortgages
- Chapter 10 continued - Capital Market Financial Instruments
- Mortgage "Points" quiz!
- Mortgages - Today's mortgage market
- Chapter 11: The Mortgage Market
Day 10 PPT - Mortgages
- Mishin Chapter 11 PPT: Mortgages! (Called Chapter 12 on PPT)
- Types of Mortgage Loans
- Conventional or Standard
- ARMs - Adjustable Rate Mortgages
- Others
- Characteristics of the Residential Mortgage
- Mortgage interest rates
- Points
- PMI
- Mortgage Loan Amortization
- Computing the Payment on a Mortgage
Week 4
December 21, 2010 - Chapter 10: The Bond Markets
- Chapter 9: Finish Money Market Financial Instruments
- Repos - Repurchase Agreements
- Negotiable CDs
- Banker's Acceptances
- Eurodollars
- Chapter 10: Capital Market Financial Instruments
- US Government securities: U.S. Treasuries mostly
- Capital Market Interest Rates
- Corporate bonds
- US Government Agency securities (Especially Fannie Mae and Freddie Mac - See Mortgage Chapter too!)
- State and Local Gov't
Quiz today - To buy a Muni or Corporate Bond - Marginal Tax Rate consideration (MTR)
Thanks to one of our Students who found the calculators below
NOW can anyone find a CHEAPER Chinese brand of the same Business Analyst calculator? - They must have the 5 functions: FV, PV, I/Y, PMT, N.
- You may use these calculators on the exam and I will show you how to use them, if you so desire.
Day 7 PPT
Day 7 PPT - Thoughts and Questions
December 23, 2010 - Finish Chapter 10: Stock and Bond Discussions
Week 3
December 14, 2010 - Finish 8 and begin Chapter 9: The Money Markets
- Bring your calculators today!!
- Problem Set 2 due TODAY!
- Real versus Nominal Wage rates
- The Loanable Funds "Framework" Revisited:
- 3 MORE Applications - 1. "The Fisher Effect," 2. Negative Savings Rates and 3. Government Budget Deficit
Problem Set 3 postponed until Chapter 10
Chapter 8 continued - The Fed tools...
- Tools of the Central Bank: Open Market Operations (Buying and Selling Bonds), Discount Rate, Required Reserve Rate
- The Fed: Goals and Targets - we will talk about the Central Bank ALL term, but one last topic at the end of Chapter 8
- The "Tools" and the Affect upon the Money Supply - Notice the PPT
Day 5 PPT - "Money" Rates
Mishkin's Chapter 9 PPT - The Money Market
Mishkin's Chapter 10 PPT - The Bond Market
Chapter 9: Money Market Financial Instruments
- US Treasury Bills
- Negotiable CDs
- Commercial Paper (know those three components of this one)
- Money Rates - Note that data may be found in the Federal Reserve Board of Governor's website.
- Only Handwritten answers, please. For Thursday, December 16, 2010 find the prime rate, near closing bid Fed Funds rate,
commercial paper rate, T-Bill rate and LIBOR rate. Hint see p. 273. (5 pts)
- Make sure to include the date you are quoting these numbers from (like a citation in ACAD 103 and 201)
- Three Places worth looking for rates for Tuesday:
December 16, 2010 - Finish Chapter 9 and Chapter 4
- Chapter 9: Money Market Financial Instruments
- US Treasury Bills
- Commercial Paper (know those three components of this one)
- Federal Funds - Daily and Target FF rates, 2008
- The Federal Funds Market - Changed since our book - notice the "FUNKY" Supply curve in the PPT
- What are Federal Funds? A great definition question for the Mid-term exam! (See pg. 262)
- Only Handwritten answers, please. For Tuesday, December 21, 2010 find the current 10 yr. U.S. Treasury Note rate, 30 yr. U.S. Treasury Bond rate,
average corporate bond AAA and BBB rates (see p. 293), and the a recent municipal bond rate. (5 pts)
- The LAST part of Chapter 4:
- Liquidity Preference "Framework:" The Supply and Demand for Money (End of Chapter 4 in our book)
- 1st note: Quantity of Assets Supplied = Quantity of Assets Demanded
- 2nd note: The interest rate is the opportunity cost of holding money - it's like the price of money
- Shifts in Demand for and Supply of MONEY
- Applications: Boom/Recession in the Economy, Price level changes, Money Supply Changes
- Compare the results for Booms/Recessions with the Loanable Funds Framework - they are equivalent!
- Higher GROWTH RATE in the Money Supply: the "Effects" Last topic in Chapter 4
Problem Set 3 - assigned Next class - "Interest rate calculations" Due on December 23, 2010
Day 6 PPT - Government Budget Constraint
Week 2
December 7, 2010 - Finish Chapter 3 and begin Chapter 4: The Behavior of Interest Rates
- Bring your calculators today!!
- A Bank's Liabilities - IOUs (What's an IOU?) What is money?
- Let's do the calculations: Consol Bond and Price versus Interest Rate
- 1. Simple Present Value of a Future Amount
- 2. Fixed Payment Loans - Yield-to-Maturity
- 3. Coupon Bond Calculations - VERY IMPORTANT!!
- 4. Discount Bonds - U.S. Treasury Bills, for example
- Problem Set 2 due Dec. 14, 2010 - Available NOW! 20 points
- Treasury Issues for Problem Set 2
- Return versus interest rate - capital gains/losses
- Reinvestment Risk
Mishkin's Chapter 4 PPT
The Theory of Asset Demand
Wealth
Expected return
Risk
Liquidity
Day 3 PPT - CPI, IP, and many other notes!
December 9 2010 - Finish Chapter 4 and begin Chapter 8: The Fed, Economic Indicators and Markets
- Bring your calculators today!!
- Also the Benefits of Diversification
- Chapter 4: The Bond Market and The Loanable Funds "Framework"
- Notice the y-t-m (interest rate) IS the expected return!
- Key also is that "The interest rate is the inverse of the Price of a Bond"
- Look at BOTH graphs - The Bond Market, which is the inverse of the Loanable Funds Market
- "Shifts"
- Demand, know the Theory of Asset Demand
- Supply, Booms/Recessions, Expected Inflation and Government Activities
- 4 Applications - 1. "The Fisher Effect," 2. Business Cycles, 3. Negative Savings Rates and 4. Government Budget Deficit
- Credit Markets and the Yield Curve
Chapter 8: The Fed - Mishkin's Chapter 8 PPT
- Central Banks - the Fed and the PBC (People's Bank of China)
- The Fed's Balance Sheet
- Open Market Operations versus Discount lending - how does each affect the balance sheet
- The "Tools" and the Affect upon the Money Supply - Notice the PPT
- Tools of the Central Bank: Open Market Operations (Buying and Selling Bonds), Discount Rate, Required Reserve Rate
Supplemental Day 4a PPT - Problem Set 2 Thoughts
Day 4 PPT - The Fed Tools in brief!
Week 1
November 30, 2010 - An Introduction and begin Chapter 3: Understanding Interest Rates
- An Introduction to Financial Institutions and Markets
- Chapter 1: Very Briefly, Financial Markets
- Mishkin's Chapter 1 PPT READING - FYI *(For Your Information)*!
- Debt Markets and Interest Rates
- Graph - T-Bills versus US Gov't Bonds versus Corporate Bonds - what's the difference? Page 5
- "The interest Rate" - notice that (mostly) all interest rates track together
- Stock Markets
- Foreign Exchange Markets
- The Yuan Now Pegged to the Dollar again!?!
- Mishkin's Chapter 3 PPT
- QUIZ - the 3 Goals of any MACROECONOMY! and 3 indicators!
- Problem Set I - AVAILABLE HERE!
NO TYPING! The Homework is due Thursday, December 2, 2010 at the beginning of class for 15 points.
- Central Banks - the Fed and the PBC (People's Bank of China)
- The Money Supply and Financial Intermediaries
- Day 1 PPT - An Introduction
December 2, 2010 - Chapter 3: Understanding Interest Rates (continued)
- Problem Set 1 due today! After I collect them, the assignments are late and 3 points will be subtracted. NO TYPING!
- What is a price index and how do we calculate them? CPI, GDP deflator
- Growth rates (inflation rate) will also be calculated.
- Bring your calculators today!!
- What is the value of any index at the base year?
- Mishkin's Chapter 2 PPT - For Review and Reading
- Some key concepts from your reading of Chapter 2: (See PPT)
- Primary and Secondary Markets
- Adverse Selection and Moral Hazard
- Transaction Costs and Economies of Scale
- Let's do the calculations:
- Simple Present Value
- Simple Loan
In Class Presentation
- 1. GDP is on p. 563 of Krugman/Wells - Economics Textbook
- 2. GDP = C + I + G + NX ... p. 566
- 3. CPI is on p. 578.
- U.S. Treasuries See p. 52-58 (our textbook, more in Chapters 9 and 10)
- Bills - 1 month to 1 year (called T-Bills)
- Notes - 1 to 10 years
- Bonds - 10 to 30 years
Day 2 PPT - Basic information about Chapter 2 - read Chapter 2 on your own! REQUIRED!~
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email: andrew at andrewparkes.com
Last Update: March 3, 2011
By Andrew L. H. Parkes, Ph. D.
At the FED - Commercial Paper rates!
