Financial Markets, Risk Management, and the Regulatory Environment (RMRR) 699

Overview

RMRR 699 is a 10-week, six-credit course. The workload is the equivalent of taking two online electives at the same time.

This course will introduce several types of financial markets and institutions and the way they function. Financial markets, such as the stock market, bond market, money market, and mortgage market, are where savings by households, businesses, and government are transferred to people who have a shortage of funds but are able to put their borrowings to productive uses. Financial institutions, such as chartered banks, credit unions, investment banks, mutual funds, and finance companies, act as a bridge between the savers and the end borrowers. This course will explain how such institutions manage risk with different types of assets that can be bought and sold in financial markets, a large majority of them being both within and across national borders.

RMRR 699 will also introduce the following:

• The roles of the central bank and the types of tools it can use to stabilize financial markets and the economy.
• The regulatory environment within which financial transactions take place.
• How prudential regulation constrains chartered banks and other financial institutions from taking excessive risks and thus controls the level of risk in the whole financial system.
• What can be done to improve the regulatory environment without having significant negative impacts on the incentives for business.

The course will also describe the most common drivers of financial crises and the role of prudential regulation in averting such crises. Financial crises are of special relevance after the global financial crisis of 2007–2009.

An applied managerial approach will be adopted by presenting case applications throughout the course. These are expected to familiarize students with the problems that management staff of financial institutions routinely face and solve. The course will also provide the necessary foundation for other finance electives.

All individuals and businesses interact frequently with financial institutions to manage their day-to-day operations. This course will be useful for anyone looking to build a solid understanding of the financial world and to be better able to manage risk related to financial markets in personal and business situations.

Outline

This course is divided into 10 lessons.

Lesson 1: Overview of the Financial System and an Introduction to the Role of Interest Rates

Lesson 2: Determination of Interest Rates and the Effects of Risk and Term Structures

Lesson 3: Financial Markets and the Role of Financial Institutions

Lesson 4: Money Market, Bond Market, and Stock Market

Lesson 5: Mortgage Market, Foreign Exchange Market, and the International Financial System

Lesson 6: Banking, Management of Financial Institutions, Financial Crises, and advanced topics related to Financial Stability

Lesson 7: Financial Regulation, Central Banking, and the Tools of Monetary Policy

Lesson 8: The Mutual Fund Industry, Insurance Companies, Investment Banks, and Other Financial Intermediaries

Lesson 9: Risk Management in Financial Institutions and Hedging with Financial Derivatives

Lesson 10: Course Wrap-Up

Learning outcomes

Students will develop an understanding of the following:

• The meaning and role of interest rates
• The working of financial markets and if such markets are efficient
• Different types of financial institutions, their asset and liability structures, and the way they manage risks
• The functioning of different types of financial markets:
  • Money market
  • Bond market
  • Stock market
  • Mortgage market
  • Foreign exchange market
• The most common causes of financial crises and their effects
• The nature and role of financial regulation
• Central banking and the tools of monetary policy for stabilizing the economy

Evaluation

Grades are based on an individual assignment, a group case study, a group debate, and participation in the discussion application. The individual assignment will also assess academic writing and referencing.

Your grade will be based on the successful completion of weekly Applied Problems, two Group Projects, and a Comprehensive Individual assignment and on your participation in moderated group discussions.

Activity	Weight
Weekly Applied Problems (4 per week/Average over 7 weeks)
Own solution	8%
Discussions / comments on at least 2 solutions from others	4%
Weekly Discussions (1 per week/Average over 7 weeks)
Discussion initiation	8%
Discussions / comments on others’ postings	4%
Group Project 1
Submitted assignment	8%
Participation, as reflected in the peer evaluation	4%
Group Project 2
Submitted assignment	8%
Participation, as reflected in the peer evaluation	4%
Case Studies and Group Discussions (In-Residence Week)	14%
Comprehensive Individual Assignment	38%
Total	100%

To receive a passing grade in this course, you must meet these minimum standards:

• an average of at least 60 percent overall on the Applied Problems;
• an average of at least 60 percent overall on the Discussions;
• an average of at least 60 percent overall on the two Group Projects;
• an average of at least 60 percent overall on the Group Discussions during the In-Residence Week;
• at least 60 percent on the Comprehensive Individual Assignment.

Component marks for this course are translated into letter grades as per the Graduate Grading Policy.

Materials

Digital course materials

Links to the following course materials will be made available in the course:

Mishkin, F. S., & Eakins, S. (2024). Financial markets and institutions (10th ed.). Pearson.

Mishkin, F. S., & Serletis, A. (2023). The economics of money, banking, and financial markets (8th Canadian ed.). Pearson.

All other course materials will be accessed online.

Important links

• Academic advising
• Program planning
• Request assistance
• Support services