Proposed syllabus for text on
Financial Markets and Institutions
By: Dr. H. M. Mosarof Hossain
Department of Finance
University of Dhaka
Chapters’ Title Topics to be covered
01. Overview of the Financial assets; Debt vs equity instruments; The price of a financial asset and
Financial risk; Financial asset vs tangible asset; Role of financial assets; Financial
Environment markets; Role of financial market; Classification of financial market; Market
participants; Securities traded in financial markets-money market securities,
capital market securities & derivative securities; Valuation of securities in
financial markets; Market efficiency; Financial market regulation
Globalization of financial market and Derivative markets, Views of islam
about financial asset and market.
02. Financial Financial institutions; Role of financial intermediaries; Overview of
intermediaries & asset/liability management of financial institutions - nature of liabilities and
innovation liquidity concerns; Financial innovation; Motivation for financial innovation
and Asset securitization, Asset securitization in islam.
03. Market Stock market transactions-placing an order, margin trading, short selling;
Microstructure and How trades are executed- floor brokers, specialist, effect of the spread on
strategies transaction costs, electronic communication networks, program trading;
regulation of stock trading-circuit breakers, trading halts, Securities and
Exchange Commission; How barriers to international stock trading have
decreased- reduction in transaction cost, reduction in information costs and
reduction in exchange rate risk.
04. Depository Asset/liability problem of depository institutions- interest rate risk and
Institutions liquidity concerns; Commercial banks – bank services, bank funding and
regulation; Bank management, Bank performance; Savings & loan
associations; Savings banks and Credit unions, Islamic commercial banking,
Lending and borrowing according to shariah, Stands of islam about interest,
Interest vs Profit.
05. Insurance Insurance and types of insurance – life insurance, health insurance, property
Companies & casualty insurance, liability insurance, disability insurance, long-term care
insurance, structured settlements, investment oriented products and annuity;
Insurance company - Life insurance companies, Property and casualty
insurance companies, fundamentals of the insurance industry; Regulation of
the insurance industry; structure of insurance company; Forms of insurance
company; Types of life insurance, Islamic concept on insurance, Procedures
of insurance dealing in islam.
06. Investment Types of investment companies – open-end funds, closed-end funds and unit
Companies and trusts; Fund sales charges and annual operating expenses; Economic
Exchange Traded motivation for funds; Types of funds by investment objective; Taxation of
Funds mutual funds; Regulation of funds, Structure of a fund; Exchange traded
07. Pension Funds Introduction to pension plans; Types of pension plans – defined benefit plans,
defined contribution plans, hybrid pension plans and cash balance pension
plans, Investments, Regulation of pension fund; Managers of pension funds;
08. Leasing Definition of lease and leasing company; Types of leases; Rationale of
Companies leasing; Funding; Using of fund, Regulation of leasing company;
Mathematical problems on leasing decision and leasing vs buying decision.
09. Properties and Properties of financial assets – moneyness, divisibility and denomination,
Pricing of Financial reversibility, cash flow, term to maturity, convertibility, currency, liquidity,
Assets return predictability, complexity and tax status; Principles of pricing financial
assets; Price volatility of financial assets – the effect of maturity, the effect of
the coupon rate, effect of the level of yields.
10. The Level & The theory of interest rates – Fisher’s classical approach, the loanable funds
Structure of Interest theory, the liquidity preference theory, changes in money supply and interest
Rates rates; The determinants of the structure of interest rates – features of a bond,
yield on a bond, the base interest rate, the risk premium, types of issuers, term
to maturity, inclusion of options, taxability of interest and expected liquidity
of an issue.
11. Risk/Return and Portfolio theory – investment return and risk; Diversification; Risk of
Assets Pricing Model individual security; Estimating beta; Capital asset pricing model and
Arbitrage pricing theory.
12. Primary Markets The traditional process of issuing new securities – underwriting, gross spread,
and the Underwriting initial public offerings, selling group; Investment bankers; Regulation of
of Securities primary market; Variation in underwriting process – bought deal, auction
process and preemptive rights offering; Private placement of securities.
13. Secondary Definition; Functions; Trading locations; Market structures; Perfect markets;
Markets Role of brokers and dealers; Market efficiency – operational and pricing.
14. Markets for Treasury securities-types, primary market, secondary market, stripped
Government Debt treasury securities; Types of securities issued; Methods of distribution; Types
and features of municipal securities-tax backed debt, revenue bonds, hybrid
and special bond structures, municipal notes, redemption features; Municipal
bond ratings; Tax risks associated with investing in municipal securities;
Yields and regulation of municipal securities market.
15. Markets for Credit risk; Commercial papers; Medium-term notes; Structured medium-
Corporate Senior term notes; Bank loans; Syndicated bank loans; Lease financing; Corporate
Instruments bonds, Preferred stock, Bankruptcy and Creditor rights.
16. The Mortgage Definition and Origination of mortgage; Types of mortgage designs – (i)
Market fixed-rate, level-payment, fully amortized mortgage (ii) adjustable-rate
mortgage (iii) graduated payment mortgage (iv) price level adjusted mortgage
& (v) dual-rate mortgage; Investment risks – credit risk, liquidity risk, price
risk, prepayments and cash flow risk; Mortgage-backed securities market- (a)
Development of the secondary mortgage market- (i) Foundations of the
mortgage market(ii) securitization of mortgage (b) Mortgage Pass-Through
Securities (i) Cash flow characteristics (ii) Issuers of mortgage pass-through
securities (iii) Prepayment risks associated with pass-through securities (iv)
Prepayment conventions (c) Collateralized mortgage obligations; Asset-
backed securities markets- Motivation for issuing asset-backed securities,
Features of asset-backed securities, Major asset classes securities, Credit
consideration for a corporate bond versus an asset-backed security.
17. Markets for Financial futures markets- Futures contract, Futures versus forward contracts,
Derivative Securities Role of futures in financial markets, Forward rate agreements; Options
markets- Options contracts, Differences between options and futures
contracts, Return and risk characteristics of options, economic role of the
option markets, US option markets, Option markets outside US; Pricing of
Futures and Options Contracts- pricing of futures contracts, pricing of
options; The applications of futures and options contracts.
18. The Market for Foreign exchange rates-Exchange rate quotation conventions, Foreign
Foreign Exchange exchange risk; Spot market-cross rates, dealers, the euro; Instruments for
Rate Risk hedging foreign exchange risk- currency forward contracts, currency futures
contracts, currency options contracts and currency swaps.
19. Regulators in Securities and Exchange Commission- Securities and Exchange Commission
Financial Markets Act, Background of Securities and Exchange Commission, Objectives and
functions of Securities and Exchange Commission, Role of Securities and
Exchange Commission, Formation and management of Securities and
Exchange Commission, Departments of Securities and Exchange
Commission; Stock Exchanges- Background of establishing Stock Exchange,
Objectives of Stock Exchange, Functions of Stock Exchange, Role of Stock
Exchange in financial market, Services offered by Stock Exchange, Listing of
securities in Stock Exchange.
1. Financial Markets and Institutions – Jeff Madura
2. Foundations of Financial Markets and Institutions – Fabozzi, Modigliani and Jones Ferri
3. Markets and Institutions-A contemporary Introduction to Financial Services- William L. Scott
4. Financial Markets and Institutions – Robert D. Aurebach
5. Financial Institutions and Markets – Polakoff, Durkin and Others.