Self-Study
20
Overview
Finance
There are no prerequisites.

Course Description

Financial markets represent the lifeblood of our global economy. These mechanisms promote greater economic efficiency by transferring funds from individuals, businesses, and governments with an excess of available funds to those with a shortage. Many financial markets have been in existence for hundreds of years; however the modern era has brought along many new innovations such as securitization and the derivatives market.

This course provides an overview of the world's largest financial markets, including the money, bond, stock, mortgage, foreign currency and derivatives markets. This course reviews the various types of financial risk that impact these markets, as well as the economic variables that influence market activity (such as interest rates and monetary policy).



Instructor

Michael J. Walker, CPA

Michael J. Walker, CPA, is based in New England and has decades of accounting experience in the financial services, information technology services, and construction industries. He has an extensive technical accounting background that includes hands-on experience with U.S. GAAP and International Financial Reporting Standards (IFRS). His expertise includes accounting for financial instruments, securitizations, and other banking products. He graduated from Bentley University with a BS in finance and an MS in accountancy.



Course Specifics

Finance
Jul 21, 2016
There are no prerequisites.
SS3121091
202
None


Compliance Information

103220
Qualifies for CA Fraud: No


Learning Objectives

Upon successful completion of this course, participants will be able to:

Chapter 1

  • List financial markets and the transactions that take place in them
  • Cite how the efficient market hypothesis is used
  • Identify the various types financial intermediaries
  • List characteristics of capital and money markets

Chapter 2

  • Identify how a bond's yield-to-maturity impacts how it is traded
  • Compare default risk, liquidity, and income tax considerations of different types of financial instruments
  • Identify various yield curve shapes and the theories behind them

Chapter 3

  • Cite the role that the Federal Reserve System in influencing interest rates and setting requirements and regulations
  • List the tools used by the Fed to conduct its monetary policy and explain how they impact the U.S. money supply
  • Identify how reserve deficiencies are calculated

Chapter 4

  • Identify the characteristics of the money markets
  • Identify the types of financial instruments that exist and transactions that occur in the money markets
  • Calculate interest income and payments for money market transactions

Chapter 5

  • Cite the primary characteristics the bond market
  • Identify terms and provisions set by bond issuers
  • Identify how bonds are rated
  • Define and explain terms related to bonds such as rate, bid, ask, and repurchase
  • Identify the unique attributes of Treasury, municipal, and corporate bonds
  • Differentiate between common and preferred stock
  • Differentiate between various stock markets and exchanges

Chapter 6

  • Calculate equity in a mortgage loan
  • Identify rules regarding mortgage insurance
  • Identify the various types of mortgage loans and the roles of agents and financial institutions play in the mortgage-lending process
  • Define default risk
  • Define terms related to mortgage-backed securities
  • Identify liquidity risk in various financial instruments

Chapter 7

  • Identify the characteristics of and terminology used in foreign exchange markets
  • Calculate direct and indirect foreign exchange quotes
  • Identify how economic factors influence foreign exchange rates
  • Define foreign exchange spot and forward contracts
  • Calculate payments for foreign exchange spot and forward contracts

Chapter 8

  • Define the various types of risk that impact financial markets
  • Identify ways to mitigate risks associated with financial markets
  • List instruments traded in derivatives markets
  • Identify the characteristics of forwards, futures, swaps, and options
  • Compare futures contracts and forward agreements
  • Compare credit default swaps, currency swaps, interest rate swaps, and equity swaps
  • Define terms related to option contracts



Table of Contents

Chapter 1 – Financial Markets & Intermediaries

Learning Objectives

Overview of Financial Markets

What Are Financial Markets?

Market Participants

Structure of Financial Markets

Debt and Equity Markets

Primary and Secondary Markets

Exchanges and over-the-counter markets

Money and Capital Markets

Pricing Theory in Financial Markets

Pricing Mechanisms

The Efficient Market Hypothesis

Financial Intermediaries

Role of Financial Intermediaries

Depository Institutions

Contractual Savings Institutions

Investment Intermediaries

Chapter 1 Summary

Chapter 1 Review Questions

Chapter 2 – Interest Rates

Learning Objectives

Overview of Interest Rates

What Are Interest Rates?

Simple and Compound Interest

Fixed and Floating Interest Rates

Annual Percentage Rates (APR)

Yield-to-Maturity (YTM)

Determination of Interest Rates

Demand for “Loanable Funds”

Supply of Loanable Funds

Market Equilibrium

Inflation and the Fisher Effect

Risk Structure of Interest Rates

Default Risk

Liquidity

Income Tax Considerations

Estimating Bond Yields

Term Structure of Interest Rates

The Yield Curve

Expectations Theory

Segmented Markets Theory

Liquidity Premium Theory

Chapter 2 Summary

Chapter 2 Review Questions

Chapter 3 – Central Banking and Monetary Policy

Learning Objectives

The Federal Reserve System

Federal Reserve Banks

Member Banks

Board of Governors

Federal Open Market Committee (FOMC)

Federal Advisory Council (FAC)

Monetary Policy

Open Market Operations

Reserve Requirements

Discount Lending

The Money Supply

Money Supply Measures

History of the Money Supply and Monetary Policy

Chapter 3 Summary

Chapter 3 Review Questions

Chapter 4 – Money Markets

Learning Objectives

Introduction to Money Markets

Money Markets Defined

Money Markets Participants

Money Market Instruments

Treasury Bills

Auctioning New T-Bills

Federal Funds

Methods of Federal Funds Exchange

Types of Federal Funds Instruments

Commercial Paper

Placement

Certificates of Deposit

Variable-Rate CDs

Issuing Banks

Deposit Notes and Bank Notes

Repurchase Agreements

Characteristics of Repurchase Agreements

Repo Rates & Returns

Banker’s Acceptances

Chapter 4 Summary

Chapter 4 Review Questions

Chapter 5 – Capital Markets (Part I)

Learning Objectives

The Bond Market

Bond Markets Defined

Bond Markets Participants

Types of Bonds

U.S. Treasury Bonds

Treasury Bond Quotations

Other Types of Treasury Bonds

Municipal Bonds

Tax Exemption

Types of Municipal Bonds

Corporate Bonds

The Stock Market

Common and Preferred Stock

Common Stock

Preferred Stock

Stock Quotations

Stock Markets and Exchanges

Organized Exchanges

Over-the-Counter Markets

Electronic Communications Networks (ECNs)

Stock Indexes

Chapter 5 Summary

Chapter 5 Review Questions

Chapter 6 – Capital Markets (Part II)

Learning Objectives

The Mortgage Market

Mortgages Defined

Mortgage Characteristics

Government Loans vs. Conventional Loans

Fixed-rated vs. Adjustable-rate Mortgages

Credit Quality and Documentation

Mortgage Lending Institutions

Direct Lender vs. Loan Broker

Depository vs. Non-depository

Originators vs. Servicers

Mortgage Underwriting Process

Credit Score

Loan-to-Value Ratio

Income Ratios

Documentation

Mortgage Securitization Process

Definition and Brief History

Brief History

Benefits of Securitization

Participants in the Process

Structuring

Stage 1: Segregating the Mortgages

Stage 2: Creating Securitization Vehicles

Stage 3: Providing Credit Enhancement

Stage 4: Issuing Interests in the Mortgage Pool

Types of Mortgage-Backed Securities

Mortgage Pass-Through Securities

Collateralized Mortgage Obligations

Stripped Mortgage-Backed Securities

Chapter 6 Summary

Chapter 6 Review Questions

Chapter 7 – Foreign Exchange Markets

Learning Objectives

Introduction to Foreign Exchange Markets

Foreign Exchange Defined

Market Characteristics

The World’s Largest Financial Market

The 24-Hour Market

An International Network of Dealers

The Role of the Dollar

Payment & Settlement Systems

Institutional Use of Foreign Exchange Markets

Foreign Exchange Rates

Exchange Rates Defined

Quotes

Exchange Rate Determination

Purchasing Power Parity (PPP)

Foreign Exchange Transactions

Spot Transactions

Forward Transactions

International Arbitrage

Locational Arbitrage

Covered Interest Arbitrage

Chapter 7 Summary

Chapter 7 Review Questions

Chapter 8 – Derivatives Markets

Learning Objectives

Financial Risk Management

Financial Risks

Hedging Financial Risk

Derivative Instruments

Forward Markets

Forward Contracts

Forward Rate Agreements

Futures Markets

Futures Contracts

Futures Exchanges

Market Mechanics

Swap Markets

Swap Contracts

Interest Rate Swaps

Other Types of Swaps

Options Markets

Options Contracts

Options Trading

The Options Clearing Corporation (OCC)

Chapter 8 Summary

Chapter 8 Review Questions

Review Question Answers and Rationales

Glossary

Index

Final Examination

Answer Sheet

Course Evaluation

Glossary

Index

Final Examination

Answer Sheet

Course Evaluation



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