Financial System of Economy 2600-DSFRdz2SFG

The major goal of the course is to understand the role of money, financial instruments, financial intermediaries and financial markets in the system of market economy.
The course programme covers to great extent topics discussed on such courses as basics of finance and finance.
Lecture:
1. Evolution of monetary systems and money forms in history of economics (3 hours)
• Definition and functions of money.
• Origins of money, monetary systems: commodity money, paper money redeemable for gold (or other precious metals), paper fiat/fiduciary money.
• Modern forms of money: cash, deposit money, electronic money.
2. Functions and structure of financial system of market economy (2 hours)
• Financial stocks and flows against real stocks and flows (tangible and intangible).
• Financial assets of economy: money – financial capital.
• Basic canons of financial system of economy: liquidity - risk - income. Liquidity as a feature of assets, economic agents, markets and financial system as a whole.
3. Financial instruments (2 hours)
• Classification of financial instruments in market economy according to following criteria: sort of representing law, maturity and due dates, way of buying out, discounted and compounded.
• Interest and capital gains from financial instruments.
4. Charging interest and discounting (2 hours)
• Essence and definition of interest rate.
• Cost of money in time.
• Interests in different types of discounting.
• Nominal, real, effective (actual) interest rates.
5. Financial intermediaries (3 hours)
• Creditors – savings (households) and debtors (companies and state) in economic system.
• Classification of financial intermediaries.
• Methods of raising capital, risk and investment strategies of different financial intermediaries: savings banks, insurance companies, pension and investment funds, investment banks, factoring and leasing institutions, etc.
6. Financial markets (3 hours).
• Structure of financial markets and their classification: money markets and capital markets; debt and equity markets, primary and secondary markets, exchanges and over-the-counter markets.
• Interbank foreign exchange market (FOREX)
• Interbank money market – WIBID, WIBOR, LIBOR, EURIBOR rates.
• Market forms: primary markets and secondary markets, public trading. Spot and forward markets. Forwards, futures and option transactions.

Workshops
1. Introductory classes. Financial markets – classification and functions (4 hours).
2. Money and its forms. History of money. Money supply (monetary aggregates), money creation mechanism – theoretical issues and analysis of money supply data (4 hours).
3. Financial instruments and securities (6 hours):
a. central bank bills, Treasury bills (T-bills), certificates of deposit (CDs), commercial papers;
b. equities (stocks, shares), rights to shares, pre-emptive rights, depositary receipts (ADRs and GDRs);
c. bonds (convertible, with warrants, income etc.);
d. instruments issued by investment (mutual) funds (funds shares, investment certificates), shares issued by pension funds;
e. mortgage bonds;
f. insurance policy;
g. bills of exchange, cheques;
h. derivative securities (forwards, futures, options, warrants, swap transactions).
4. Financial mathematics (8 hours):
a. interest rate (nominal, real, effective);
b. simple and compound interest;
c. discounting;
d. present and future value of annuity.
5. Characteristics of different financial intermediaries (4 hours):
a. trustees (open-end and closed-end funds, hedge funds, Venture Capital and Private Equity funds, pension funds);
b. insurance companies;
c. leasing, factoring and forfaiting companies;
d. banks (savings, investment, universal);
e. stock exchanges and other regulated market institutions (eg. Bondspot)
6. Factoring, forfaiting, leasing and securitization (2 hours).