Faculty of Business: Finance and Economics
Credit points: 6 cp

Subject level: Undergraduate

Result Type: Grade and marks

Requisite(s): 25300 Fundamentals of Business Finance
These requisites may not apply to students in certain courses.
There are also course requisites for this subject. See access conditions.

Handbook description

The aim of this subject is to develop an understanding of the operations of a modern financial system, covering its payment, financing and market-risk management activities. Its main topic areas are financial institutions, financial markets (such as stocks, bonds and foreign exchange) and derivatives (such as futures and options). It forms the foundation for further studies in investment analysis and derivative securities.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

1. Identify and understand the different financial institutions, financial instruments and financial markets in the Australian Financial System
2. Understand the pricing of securities in Australian financial markets
3. Interpret the impact of changes in the Australian Financial System on decision making by individuals and organisations.

Contribution to graduate profile

Financial markets influence the destiny of businesses and the allocation of resources generally, through their control over the cost and supply of funds. They also contribute to the efficient operation of businesses and the economy through their provision of payment services and risk-management instruments. The subject aims to encourage and assist students to acquire knowledge of the operations of the institutions and markets that comprise Australia's financial system, and develop an understanding of the instruments used in raising finance and in the management of the risks posed by the financial system. This knowledge and understanding is essential in achieving the objectives of both the finance and banking majors.

Teaching and learning strategies

The lectures and workshops will incorporate a range of teaching and learning strategies including direct access to lecture notes, applied problem solving, online teaching and readings. Key concepts covered in lectures are reinforced in tutorial discussion.

Content

• Functions of a financial system, payment methods and indirect/ direct financing
• Types of financial Institutions and their operations
• An overview of the financial markets, securities and regulations
• Major markets and financial instruments: short-term money, bond, foreign exchange and equity markets
• Determinants of spot and forward prices: interest and exchange rates
• Derivative markets, interest rate and currency derivatives.

Assessment

Assignments (Individual)	20%
The assignments will assess students understanding of various aspects of the financial system. It will enable students to demonstrate they have met objectives 1-3.
Mid-Semester Examination (Individual)	30%
This will test students understanding of trading in financial markets, the operations of the financial institutions and the pricing of securities trading in the different financial markets in Australia. Evaluation will be in terms of students meeting objectives 1 and 2.
Final Examination (Individual)	50%
This will test students understanding of financial institutions, financial markets, both physical and derivative, and financial instruments in Australia. Evaluation will be in terms of students meeting objectives 1-3.

Examinations will be conducted under University examination conditions, and hence thoroughly address concerns regarding secure assessment. The case study will be secured through a combination of updating of assessment tasks across semesters and/or plagiarism detection software.

Recommended text(s)

Hunt, B. and Terry, C. (2004) Financial Institutions and Markets, 4th ed. Thomson Learning, Australia.

Indicative references

Viney, C. (2000) Financial Institutions, Instruments and Markets, 3rd ed. McGraw-Hill, Australia.

RBA, Reserve Bank Bulletin, (monthly).