Walter A. Haas School of Business University of California, Berkeley
MBA 232-2: Financial Institutions and Markets
Gregory R. Duffee, Instructor
Class: MW 9:30 am to 11:00 am, in C330
Midterm Exam: Wednesday, October 20
Final Exam: Probably on Wednesday, December 15, 6:00 pm to 9:00 pm
Office hours: W 2:00 pm to 4:00 pm
Office: F 645
Office phone: 642-1435
Graduate Student Instructor: Sandro Andrade
Office hours: W 11:00 am to noon
Office: F 605
Office phone: 642-8543
There will occasionally be a discussion session led by the GSI. These will take place on
Fridays, 10:00 am to 11:00 am in C325.
Text: Financial Markets and Institutions, 4th Edition, by Fred Mishkin and Stanley
Eakins (Addison Wesley)
This text is on reserve at the Haas library. Some of the issues we will address in the
course are not covered by this text (or not covered well). The text Financial Markets,
Instruments, and Institutions by Anthony Santomero and David Babbel (2 nd edition) can
be used to supplement our discussion of these issues. It is on reserve at the Haas library.
There is also an electronic course reader, which consists largely of HBS cases.
Financial markets play two important roles in the economy. First, they are used to link
those who want to save money with those who have good investment opportunities.
Second, they are used to transfer risks among individuals and firms. In modern financial
markets, these connections among investors are typically not made directly. Instead, they
are connected through financial intermediaries such as banks, brokers, mutual funds, and
pension funds. In this course, we learn how financial markets operate and consider the
economic principles that underlie the operations of these markets. We examine why
financial intermediaries are critical to the effective functioning of financial markets.
Finally, we note ways in which financial markets and institutions have undergone
remarkable transformations in the past 20 years.
MBA 232 Syllabus
Course web page
All of the overheads, sample exams, problems, solutions, and other material will be
available on Catalyst.
The class will be a mixture of lecture and discussion. Discussion is important, and thus
reflected in your grade. 'Class discussion' has two components. First, material presented
in previous lectures is fair game for cold calling. This is not done with evil intent. Rather,
the lectures build on each other, therefore students typically need to be comfortable with
earlier material in order to understand later material. Second, cases will be discussed in
class. During the class prior to a case discussion, various questions will be posed for
students to consider when studying the case. During the discussion, students need to be
familiar with the facts of the case and have formed defensible opinions about various
issues that are raised by the case.
Class discussion 5 %
Midterm exam 45 %
Final exam 50 %
A few ungraded problem sets will be distributed. They will be discussed in section.
Subject Reading (if SB, from Santomero and Babbel)
Introduction Ch. 1.
The mathematics of interest rates Ch. 3 except pp. 51-52 (discount yields) and 57-58
(real versus nominal rates).
The term structure Ch. 3 pp. 57-58.
Ch. 5 except pp. 120-127 (default risk)
MBA 232 Syllabus
Money markets Ch. 3 pp. 51-52.
Ch. 8 except pp. 235-239 (mutual funds).
Ch. 7 pp. 178-180.
Dupont, Dominique, and Brian Sack, “The Treasury
securities market: Overview and recent
developments,” Federal Reserve Bulletin, 1999.
(This article also contains much material relevant to
the next subject.)
The Treasury market Ch. 9 pp. 246-249.
Asymmetric information Ch. 14.
Corporate bonds Ch. 5 pp. 120-127.
Ch. 9 pp. 252-247.
Publicly-traded equities Ch. 9 pp. 258-264.
Ch. 21 pp. 569-574, pp. 577-579.
Primary markets SB Ch. 17.
SB Ch. 18.
The design of secondary markets SB Ch. 19.
The mortgage market Ch. 11.
Banks and loans Ch. 15.
Ch. 20 pp. 552-562.
Ch. 22 pp. 597-601, pp. 602-612.
Asset-backed securities SB Ch. 13 pp. 300-304.
and pension funds Ch. 19.
Derivative instruments Ch. 23.
SB Ch. 15, pp. 339-355.