Financial Markets, Risk Management, and the Regulatory Environment – EMRR 699
EMRR 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.
EMRR 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.
All students in the MBA for Executives program must complete Phase 1 before registering in electives. Accelerated MBA and transfer students must have prior knowledge from at least an introductory university-level course in economics or finance.
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 assets/instruments
- 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
Week 1: Overview of the Financial System and an Introduction to the Role of Interest Rates
Week 2: Determination of Interest Rates and the Effects of Risk and Term Structures
Week 3: Financial Markets and the Role of Financial Institutions
Week 4: Money Market, Bond Market, and Stock Market
Week 5: Mortgage Market, Foreign Exchange Market, and the International Financial System
Week 6: Banking, Management of Financial Institutions, and Financial Crises
Week 7: Financial Regulation, Central Banking, and the Tools of Monetary Policy
Week 8: The Mutual Fund Industry, Insurance Companies, Investment Banks, and Other Financial Intermediaries
Week 9: Risk Management in Financial Institutions and Hedging with Financial Derivatives
Week 10: Course Wrap-Up
The grade for this course is based on individual and group assignments as well as contributions to collaborative online discussions.