İKT338

School of Economics and Administrative Sciences \ Economics

3

6

Compulsory

Turkish

İKT 234

Economics Undergraduate

Basic concepts of finance, structure and functions of financial markets, financial intermediation, regulation and monitoring of financial institutions. Interest rates, risk and term structure, yield curves. Demand for financial assets, demand and supply in the bond market, bond interest rates.Asset pricing models, application to the gold market. Efficient market hypothesis. Behavioral finance. Central banks: Institutional aspects, independence, operations,market liquidity. Various financial markets:Money, bond, stock, mortgage, foreign exchange.

Mishkin, Frederick S., Eakins G. Stanley, “Financial Markets and Institutions”, 9th Edition (Global Edition), Pearson, (2018).

Thorough understanding of functions of financial markets in the world and in Turkey and their relationship to the national and global economies. Emphasis is also on theoretical concepts and how they make sense in real life. The course aims at teaching necessary and valuable knowledge and methods to students so that they use it either in academic pursuits or as they work in the private or public sectors.

1. Learning the theoretical aspects and basic concepts of finance.
2. Learning of why there are financial markets, how they function and how they are useful and interact with the economy.

Week 1: Introduction to basic finance concepts; financial markets.
Week 2: Function, structure and internationalization of financial markets; function of financial intermediaries; regulation of the financial system.
Week 3: Measuring interest rates; the distinction between real and nominal interest rates; distinction between interest rates and returns.
Week 4: Determining asset demand; supply and demand in the bond market; changes in equilibrium interest rates.
Week 5: Risk and term structures of interest rates; yield curves.
Week 6: Efficient market hypothesis; evidence for and against; behavioral finance.
Week 7: Central banks as institutions; central bank independence. Operations.
Week 8: Purpose of money markets; participants; instruments, pricing; t-bill auctions; eurodollar market; valuation; Turkish money markets.
Week 9: Purpose of bond markets participants; capital market trading; treasury and corporate bonds; municipals(tax); bond contracts, guarantees; bond yield calculations; Turkish treasury bonds; corporate bond problems, outlook in Turkey.
Week 10: Stock market. Definitions; pricing models; calculations; errors in valuation; how the market sets security prices; stock market indices; world stock markets; regulation of the stock market. Emphasis on Turkey as well.
Week 11: Mortgage Markets. Definitions; characteristics of residential mortgages; types of mortgage loans; mortgage-lending institutions; loan servicing; secondary mortgage market; securitization of mortgages; the impact of securitized mortgages on the mortgage market. Special emphasis on Turkish real estate financing and the development of mortgage markets in Turkey + global crisis and the mortgage markets.
Week 12: National and international foreign exchange markets; trading, exchange rate fixing; fx banknotes trading; international reserve management.

Midterm 50 %
Final 50 %.