Parkes' Financial Institutions and Markets Assignments Page
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Course Assignments and Tentative Outline:
Final Exam: Covers All Chapters, November 20, 2012
at 11:45 - 13:45: Rooms 1102, 1103 and 1111
PAST ASSIGNMENTS:
- Chapter 23: Hedging with Financial Derivatives I: Fowards and Futures
- Arbitrage
- Open Interest
- Globalization of Financial Futures Markets
- Margin Requirements
- Managing Interest Rate Risk
- Homework on futures markets and hedging. Hint: remember the numbers are already in 100s!
- Day 17 PPT - None Made
November 1, 2012 - 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
- 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?
Options and Swaps Homework, Due Tuesday, November 6, 2012!
Day 18 PPT - Credit Default Swaps Primer
Week 8
October 23, 2012 - Chapter 15: The Bank Firm and Bank Management
- 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 15 PPT - Bank Management - Presented In Class First.
Interesting thoughts from the Economist Magazine:
October 25, 2012 - Chapter 13: Fixed Exchange Rates and Review Chapter 12! - Begin Chapter 23: Hedging with Financial Derivatives I: Fowards and Futures
Week 7
October 16, 2012 - Chapter 12: Foreign Exchange Markets
- Review the Midterm Exam - 1st Class period
- 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
- Day 13 PPT - FOREX Thoughts, FYI
October 18, 2012 - Finish Chapter 12 - Short-Run
- Chapter 12: Foreign Exchange Markets continued
- 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
The Exchange Rate Overshooting Model
Day 14 PPT - The Yuan (1950 - 2008)
Week 6
October 9, 2012 - Chapter 11: Mortgages
October 11, 2012 - Finish Chapter 11: Mortgages
Friday, October 12 at 2:30 pm - The Midterm Exam!
- Rooms Wen Hui Building 301, 201, and Wen Bo Building 203
Week 5
September 29, 2012 - 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
- Day 10 PPT - See Day 11
- Mishin Chapter 11 PPT: Mortgages! (Called Chapter 12 on PPT)
National Day and Mid-Autumn Festival Holiday, Sept. 30 & Oct. 1 - 7
Week 4
September 25, 2012 - Chapter 10: The Bond Markets
Bring your calculators today!!
- Chapter 10: Capital Market Financial Instruments
- US Government securities: U.S. Treasuries mostly
- Capital Market Interest Rates
- Corporate bonds
- Problem Set #3 - Due Saturday, September 29, 2012
- US Government Agency securities (Especially Fannie Mae and Freddie Mac - See Mortgage Chapter too!)
- State and Local Gov't
- Mishkin's Chapter 10 PPT - The Bond Market
- Quiz today - To buy a Muni or Corporate Bond - Marginal Tax Rate consideration (MTR)
- Day 7 PPT - Basic Info
- Day 7 PPT - Thoughts and Questions
September 27, 2012 - Finish Chapter 10: Stock and Bond Discussions
Friday, October 12 at 2:30 pm will be the Midterm Exam!
- Rooms Wen Hui Building 301, 201, and Wen Bo Building 203
Week 3
September 18, 2012 - Finish 8 and begin Chapter 9: The Money Markets
- Bring your calculators today!!
- Real versus Nominal Wage rates
- The Loanable Funds "Framework" Revisited:
- Revisit the 3 Applications - 1. "The Fisher Effect," 2. Negative Savings Rates and 3. Government Budget Deficit
Chapter 8 continued - The Fed tools...
- Tools of the Central Bank: Open Market Operations (Buying and Selling Bonds), Discount Rate, Required Reserve Rate
- Today we will also discuss the "new" concept of Quantitative Easing being used by the Fed today - buying long-term bonds
- 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
Chapter 9: Money Market Financial Instruments
- US Treasury Bills ...T-Bill Rates
- Negotiable CDs
- Commercial Paper (know those three components of this one)...CP Rates..
Yield Curve
- 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)
- Money Rates - Note that data may be found in the Federal Reserve Board of Governor's website.
- Only Handwritten answers, please. For Tuesday, September 25, 2012 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:
Day 5 PPT - "Money" Rates
Mishkin's Chapter 9 PPT - The Money Market
Mishkin's Chapter 10 PPT - The Bond Market
September 20, 2012 - 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)
- Repos - Repurchase Agreements
- Negotiable CDs
- Banker's Acceptances
- Eurodollars
- Only Handwritten answers, please. For Thursday, September 27, 2012 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)
- At the Fed: Here is a good website for the Current Rates - pick only the ones that you need.
Printing this page will only get you one point!
- See Chapter 10 for definitions, etc. (Also the Ch. 10 PPT). These rates are all available from the Fed's website.
- Make sure to include the date you are quoting these numbers from (like a citation in ACAD 103 and 201) AND do NOT use Inflation Indexed Bonds!
- The LAST part of Chapter 4: (Not on the Exam)
- 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!
Day 6 PPT - Government Budget Constraint
Week 2
September 11, 2012 - 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?
- Some of these we did last week too: 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 Sept. 13, 2012 - 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 - Review of Class
September 13, 2012 - 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
Day 4 PPT - The Fed Tools in brief!
Week 1
September 4, 2012 - 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, September 6, 2012 at the beginning of class for 10 points.
- Central Banks - the Fed and the PBC (People's Bank of China)
- The Money Supply and Financial Intermediaries
- Day 1 PPT - An Introduction
September 6, 2012 - Chapter 3: Understanding Interest Rates (continued)
- Problem Set 1 due today! After I collect them, the assignments are late and 2 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!~
Day 2 PPT - Basic information about CPI and GDP deflators~
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Last Update: October 17, 2012
By Andrew L. H. Parkes, Ph. D.
Forwards and Futures Homework, Due Thursday 
