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25556 The Financial System

Warning: The information on this page is indicative. The subject outline for a particular semester, location and mode of offering is the authoritative source of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.

UTS: Business: Finance
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 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).

Subject objectives

Upon successful completion of this subject students should be able to:
1. discuss how the Australian financial system performs its core financial functions; the settlement of transactions, the flow of funds and risk transfer
2. explain the roles and principal operations of deposit-taking financial institutions, fund management institutions and the major financial markets including the markets for derivative contracts
3. describe the structure of the main financial instruments (including the plain vanilla derivative contracts) and demonstrate their use in the flow of funds and risk-transfer functions.

This subject also contributes specifically to the following program learning objectives:

  • Show an understanding of essential concepts necessary for a career in business and related professions (1.1)
  • Demonstrate inter-relationships between differing business disciplines (1.2)
  • Demonstrate an awareness of conflicting ethical demands of various stakeholders within business and related professional environments (4.1)
  • Evaluate business responses to ethical issues and dilemmas (4.2)
  • Demonstrate work-ready disciplinary knowledge (5.1)

Contribution to the development of graduate attributes

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 the finance major.

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;
• Deposit-taking and fund management financial institutions;
• Financial markets; short-term money, bond, foreign exchange and equity markets;
• Pricing of financial instruments and calculation of investment yields;
• Determinants of spot and forward prices and interest and exchange rates;
• Plain vanilla derivative contracts (FRAs, futures, swaps and options); their markets and their use.

Assessment

Assessment task 1: Assignments (Individual)

Objective(s):

This addresses subject learning objective(s):

1, 2 and 3

This addresses program learning objectives(s):

1.1 and 1.2

Weight: 10

Assessment task 2: Mid-Semester Examination (Individual)

Objective(s):

This addresses subject learning objective(s):

1, 2 and 3

Weight: 35

Assessment task 3: a) Ongoing tutorial homework 5% b) Exam 50% (Individual)

Objective(s):

This addresses subject learning objective(s):

1, 2 and 3

This addresses program learning objectives(s):

4.1, 4.2 and 5.1

Weight: 55

Minimum requirements

Students must achieve at least 50% of the subject’s total marks.

Required texts

Ben Hunt and Chris Terry, 2011, Financial Institutions and Markets, 6th edn, Cengage

References

Faculty of Business, 2010, Guide to Writing Assignments, https://www.uts.edu.au/sites/default/files/business-writing-guide-2014.pdf