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SUBJECT OUTLINE 25741 Capital Markets Course area

UTS: Business

Delivery

Autumn 2020; City

Credit points 6cp Result type

Grade and marks

Subject coordinator Dr. Ester Felez Vinas, PhD Lecturer in Finance [email protected] Consultation via appointment

Teaching staff Brandon Zhu [email protected] Dr. Mariya Yesseleva-Pionka, PhD [email protected] Marta Khomyn [email protected] Nihad Aliyev [email protected]

Subject description This subject examines the structure and behaviour of Australia's financial system and its main components. Its principal topics are the instruments and processes through which financing is arranged, the pricing of instruments and the associated risks and their management with derivatives. The subject forms part of the finance specialisation in the MBA and Master of Business degree programs where it provides a preparation for more specialised subjects in investment management, international finance and the various subjects that deal with financial institutions and risk management.

Subject learning objectives (SLOs) Upon successful completion of this subject students should be able to: 1. explain the major functions performed by a developed financial system, their inter-relationships and official supervision of the Australian financial system by the Reserve Bank of Australia and the Australian Prudential Regulation Authority 2. discuss the operations of the main financial instruments and financial markets that comprise the Australian financial system and calculate prices and investment yields for debt securities 3. evaluate the main risks involved in global financial markets and how they are managed with derivative products in Australia, and evaluate the use of derivatives for hedging purposes

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4. explain the potential for financial markets to impose financial discipline on the management of financial institutions and borrowers.

Course intended learning outcomes (CILOs) This subject also contributes specifically to the following program learning objectives: Demonstrate effective oral presentation skills suitable for academic or professional audiences (3.2) Be able to interact effectively with others in order to work towards a common outcome (3.3)

Contribution to the development of graduate attributes This subject provides finance students with an understanding of the operations of a financial system and its major components. It provides a knowledge and competency basis for subsequent specialised subjects, such as Investment Management and International Finance. This subject contributes to the development of the following graduate attributes: Communication and interpersonal skills Attitudes and values This subject also contributes specifically to develop the following Program Learning Objectives for the Master of Finance and Master of Financial Analysis: 3.1: Convey information clearly and fluently, in high quality written form appropriate for their audience

Teaching and learning strategies The subject will be taught using a combination of in-class and on-line learning activities. In-class activities include lectures and interactive exercises that provide opportunities to discuss and apply theory to practice. For example, problem-solving exercises done in a team with other students. On-line and off-line learning opportunities provide students with access to a number of current videos and case studies on topics covered in the subject that they can view before coming to class. The learning management system will be used to share information and encourage interaction between staff and students. Students will also use appropriate computer software such as word processors and presentation tools to complete assigned tasks. In preparation for class students are expected to do the following to prepare them for participation in class discussion and activities: 1. Review of lectures - Before coming to class students are required to read and review the lecture PowerPoint slides for the topic(s) being covered. This will allow them to participate in the class discussion organised by the lecturer each week. 2. Review case studies and digital resources - Before coming to class students are required to read and review case studies and watch online videos when they are provided for a topic. Lecturers will ask students to discuss in groups the main points in these case studies and online videos. After each topic is finished students are expected to: 1. Review of lectures - After each lecture students should go over the material covered and read material from the textbook that covers the topic in the lecture. Students should post questions on the Discussions forum to discuss the material being covered. These questions will be answered by other students. 2. Self-learning revision questions - A few days after a topic is covered in lectures students are required to complete the revision questions for the topic. While answers will be provided on the learning management system students might want to post questions on the Discussions forum to discuss the questions and answers. 3. Self-learning online (non-assessable) multiple-choice - Multiple choice quizzes are available for students to complete on the topics. Particular emphasis is placed on creating opportunities throughout the session for students to gain feedback on their learning. In addition to informal feedback gained from peers and tutors while participating in interactive exercises, students will receive formative feedback in the following ways: 1. through class quizzes where all students receive feedback in class on whether each question was well answered or poorly answered by the majority of students in the subject in addition to where the correct answer was covered in the lecture notes; 2. students are asked to meet with their lecturer to review their presentation slides before they do their class

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presentation; 3. written feedback from the lecturer provided on the grade sheet of the written assignment.

Content (topics) 1. 2. 3. 4. 5. 6. 7. 8.

The major functions performed by the financial system The processes of financing the risks and their management Financial products and services and their financial characteristics The roles played by financial institutions and their supervision The operations of the main markets for securities and foreign exchange The behaviour of financial variables The pricing of financial market securities The nature, purposes and risk-management uses of derivatives

Program Week/Session

Dates

Description

1

Mar 9-13

Topic 1: Introduction to Capital Markets Notes: Reference pages from Viney: Ch1 4-20, 27-28 and Learning Objectives 1.1-1.4, 1.6; Ch12 406-409 and Learning Objective 12.5.

2

Mar 16-20

PAUSE WEEK

3

Mar 23-27

Topic 2: Authorised Deposit Taking Institutions Notes:

Reference pages from Viney: Ch2 42-52, 56-71 and Learning Objectives 2.1-2.3, 2.5-2.7; Ch 8 261-276 and Learning Objectives 8.1-8.2; Ch10 317-325 and Learning Objectives 10.1 and 10.2. Ch2 Extended learning A: The standardised approach to credit risk. pp. 74-77; Ch10 Extended Learning: Securitisation. pp. 341-344.

4

Mar 30 - Apr 3

Topic 3: Investment Banking, Registered Financial Companies and Funds under Management Notes:

Reference pages from Viney: Ch3 89-115 and Learning Objectives 3.1-3.7. Ch3 Case Study: The hedge fund sector pp.117-118. Ch3 Extended learning: Project finance and structured finance. pp. 121-125.

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5

Apr 6-10

Topic 4: Equity Market I Quiz 1 will be held online during week 5 and will ask questions on material from Topics 1, 2 and 3 Notes:

Reference pages from Viney: Ch4 137-143, 146-153 and Learning Objectives 4.2-4.4, 4.6-4.10; Ch5 169-178 and Learning Objectives 5.2-5.5; Ch 6 193-198, 206-214 and Learning Objectives 6.1-6.2, 6.5-6.6. Download and read brochures on ASX trading from the ASX webpage http://www.asx.com.au/education/download-brochures.htm Ch4 Case Study: Development of Industrial Scale Bloackchain in Australia pp.154-155 Ch5 Extended learning: Australian Securities Exchange (ASX) listing rule requirements. pp. 183-188.

6

Apr 13-17

Topic 5: Equity Market II Notes:

Reference pages from Viney: Ch7 224-247 and Learning Objective 7.1-7.5 Ch7 Case Study: The effects of scandals on the market. pp. 249-250.

7

Apr 20-24

Mid-session STUVAC

Apr 27 - May 1

Topic 6: The Money Market Notes:

Reference pages from Viney: Ch 1 20-24; Ch 9 292-305, 308-309 and Learning Objectives 9.4-9.7; Ch12 396-399 and Learning Objective 12.2. Ch11 Extended learning D: Standard & Poor's credit rating definitions. pp. 379-381. 8

May 4 - 8

Topic 7: Interest Rates and Yield Curves Notes:

Reference pages from Viney: Ch12 400-405 and Learning Objective 12.4; Ch13 418-435, 438-443 and Learning Objectives 13.1-13.4. Ch13 Extended learning: The yield curve and expectations theory calculation. pp. 447-449.

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9

May 11 - 15

Topic 8: The Bond Market

Quiz 2 will be held online during week 9 and will ask questions on material from Topics 4, 5 and 6. Notes: Reference pages from Viney: Ch 1 24-25; Ch 10 325-328, 330-332 and Learning Objectives 10.3-10.4; Ch 12 392-396, 399-405 and Learning Objectives 12.1 and 12.3

10

May 18 - 22

Topic 9: Introduction to Market Trading and the Foreign Exchange Market Notes:

Reference pages from Viney: Ch1 13-16; Ch15 486-502, 505-507 and Learning Objectives 15.1-15.6 and 15.8; Ch16 515-528, 530-531 and Learning Objectives 16.1-16.3; Ch17 551-554 and Learning Objectives 17.3. Ch15 Case Study: Fixed exchange rates and currency misalignments pp. 506-507. Ch16 Extended learning: Purchasing power parity. pp. 533-535. 11

May 25 - 29

Topic 10: Forward Rate Agreements, Plain Vanilla Interest Rate Swaps and Futures Contracts Notes:

Reference pages from Viney: Ch14 455-456 and Learning Objective 14.1; Ch18 576-578 and Learning Objective 18.4; Ch19 615-619 and Learning Objective 19.7. Reference pages from Viney: Ch18 582-584 and Learning Objective 18.6 (only points 1 to 4); Ch21 666-673 and Learning Objectives 21.1-21.2, 21.6. Reference pages from Viney: Ch18 574-575 and Learning Objective 18.3; Ch19 595-607, 609-614 and Learning Objectives 19.1 to 19.6. Ch19 Case Study: SPI Futures market acts as a market-maker facilitating price discovery in the S&P/ASX 200 index pp. 619-620. 12

Jun 1-5

Topic 11: Option Contracts Notes:

Reference pages from Viney: Ch18 579-582 and Learning Objective 18.5; Ch20 627-634, 636-643, 645-647 and Learning Objectives 20.1-20.4. Download and read brochures on Options and Warrants from the ASX webpage http://www.asx.com.au/education/download-brochures.htm

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Additional information Learning resources

This subject fulfils the aims and principles of UTS Learning Futures, which is to provide you with flexible options about how, when and where you learn. You may use the university as a learning base, or learn mainly from home or work. The other flexible resources listed in this section will support your learning from either on or off campus. Out-of-lecture work In order to understand the material covered in this subject you should spend time each week on the following learning activities: 1. Pre-class review of lectures - Students are required to engage in flipped learning by reading and reviewing the lecture powerpoint slides for the topic(s) being covered. This will allow them to participate in the Zoom discussions. 2. Pre-class case studies and digital resources - Students are required to read and review case studies and watch online videos when they are provided for a topic. This will allow them to participate in the Zoom discussion. 3. After-class review of lectures - After each Topic students should go over the material covered and read material from the textbook that covers the topic in the lecture. 4. Self-learning revision questions - A few days after a topic is covered students are encouraged to complete the revision questions for the topic. While answers will be provided on Canvas you might want to post questions on the Discussions on Canvas to discuss the questions and answers.

Assessment Assessment task 1: Video Presentation (Group) Objective(s): This addresses subject learning objective(s): 1, 2, 3 and 4 This addresses program learning objectives(s): 3.2 and 3.3 Weight:

20%

Task:

In the first lecture students will start forming a team of up to five (5) students. Teams will present their answer to a Topic question by means of a video recording. Groups must be formed in Canvas and will be locked at the end of the third week. Groups must e-mail the corresponding teaching staff the information regarding the group members (name and surname, student number, and uts e-mail of each member) latest by 30 March 2020.

Length:

Video: 10 to 15 minutes. Slides: A maximum of 15 slides

Due:

Not applicable

Requirement for the video presentation: Further information: Each team will prepare a video recording answering their topic question. The duration of the video will be of a maximum of 15 minutes and a minimum of 10. Teams must also prepare overhead slides or PowerPoint slides to assist them in explaining their answer to the task. The maximum number of slides that can be used is 15 slides. All members in a group must contribute to the delivery of the presentation. For the purpose of individual assessment, each slide must containt the name of the student in charge of presenting the corresponding slide. Students must also indicate in the recording the information on the student presenting (name, student ID, UTS e-mail). A copy of the slides and the video recording must be delivered to the corresponding tutor. The Faculty of Business provides resources to assist students in completing assignments on the 23/03/2020 (Autumn 2020)

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UTS website. To find these go intohttp://www.uts.edu.au/current-students/business/study-and-assessment-resources. UTS also provides academic support on the websitehttp://www.uts.edu.au/current-students/support/academic-support/assignments-and-exams

Assessment task 2: Online Quizzes (Individual) Objective(s): This addresses subject learning objective(s): 1, 2, 3 and 4 Weight:

30%

Task:

These cover the first six lectures. These Quiz papers assess specified parts of knowledge. Quiz 1 - To be held online in the week from April 6 to April 10 Quiz 2 - To be held online in the week from May 11 to May 15 Students who do not attend the online quizzes will have its weight added to the final examination conditional on the students submitting, receiving approval and complying with the requirements of special examination application in accordance with the UTS rules. You can apply for Special Consideration if less than 2 working days have passed since your quiz. https://www.uts.edu.au/current-students/managing-your-course/classes-and-assessment/ special-circumstances/special If the composite mark for the final exam is more than 50 percent, the UTS rules on borderline result shall apply whereby students will be allowed to undertake a supplementary final examination (range of 45-49). Where a student completes and passes a supplementary examination, the maximum mark awarded for the subject will be 50 Pass.

Due:

Not applicable; see Further information

Assessment task 3: Final Exam (Individual) Objective(s): This addresses subject learning objective(s): 1, 2, 3 and 4 Weight:

50%

Task:

The final exam covers all course topics Duration: 2 hours plus 10 minutes reading time.

Due:

UTS Exam Period

Further Examinations will be conducted under University examination conditions, and hence thoroughly information: address concerns regarding secure assessment. The assignment will be secured through a combination of updating of assessment tasks across semesters and/or plagiarism detection software. If your performance in the centrally conducted Final Exam "has been affected by extenuating or special circumstances beyond your control" you can apply for Special Consideration. Explanation about applying for Special Consideration can be viewed on https://www.uts.edu.au/current-students/managing-your-course/classes-and-assessment/ special-circumstances/special 23/03/2020 (Autumn 2020)

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If you miss or cannot sit the centrally conducted Final Exam you need to apply for a Special Exam within 24 hours of the exam. Explanation about applying for the Special Exam can be viewed on http://www.sau.uts.edu.au/forms/. Students who are granted a special alternative examination based on approved application for special examination will not be rescheduled if the student fails to attend the special alternative examination on the designated schedule.

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

Recommended texts The subject closely follows the textbook: Viney, C. (2019) Financial Institutions, Instruments and Markets, 9th edition, McGraw-Hill, Australia. Hunt, B. and Terry, C. (2018) Financial Institutions + Markets, 8th edition, Cengage Learning (NZ) Limited. Students are provided with lecture notes that include material from several texts and publications. There are three Australian textbooks that cover the topics studied in the subject. These textbooks are listed below under ‘Reference Texts’. In the ‘Class Schedule’ reference pages are written for the textbook by Viney.

References Viney, C. (2019) Financial Institutions, Instruments and Markets, 9th edition, McGraw-Hill, Australia. Hunt, B. and Terry, C. (2018) Financial Institutions + Markets, 8th edition, Cengage Learning (NZ) Limited. Articles in Reserve Bank of Australia Bulletins available on www.rba.gov.au Articles in the Sydney Morning Herald and Australian Financial Review Booklets from www.asx.com.au called 'Understanding Options Trading' and 'Understanding Options Strategies' Faculty of Business (2014), Guide to Writing Assignments, Faculty of Business, University of Technology, Sydney. This can be downloaded from: http://www.uts.edu.au/current-students/business/study-and-assessment-resources. Faculty of Business (2014) Developing you academic writing, Study and Assessment Resources, Faculty of Business, University of Technology, Sydney. This can be downloaded from: http://www.uts.edu.au/current-students/business/study-and-assessment-resources/developing-your-academic-writing Teaching resources The web learning resources made available by the University can be accessed on: www.uts.edu.au/teachlearn/resources.html www.bell.uts.edu.au www.uts.edu.au/teachlearn/avoidingplagiarism Some useful web addresses www.asx.com.au Australian Securities Exchange www.apca.com.au Australian Payments Clearing Association www.asic.gov.au Austr...