# Principles of Financial Markets

In the simplest sense the discipline of Finance is concerned with the process of raising or providing funds and capital. It focuses on the ways in which individuals, businesses and organizations procure, distribute and employ financial resources generally.

As such it is concerned with the careful balancing act that entities enter into in employing their scarce financial resources. Financial sector professionals moderate and manage the risk and liquidity issues inherent in the personal, commercial and government projects.

CHAPTER I – Introduction to financial markets

Why study finance?

FINANCE COMPANIES

SECURITISERS

Superannuation funds

MERCHANT/INVESTMENT BANKS

Financial Instruments

Debt based instruments

Equity based instruments

Derivative Instruments

Central banks and monetary policy, theory and practice

Monetary Policy

The tools of monetary policy

Introduction to open market operations

The Board of the Reserve Bank of Australia

An introduction to coinage and currency

Coin and Currency Distribution

Concluding remarks

Chapter I - Questions & Discussion points

Key Issues & Discussion points

Chapter 1 Essay Questions

CHAPTER II – Intermediate Financial Mathematics A

PART A - SIMPLE INTEREST AND DISCOUNT

Understanding Interest

Simple interest calculations

Ordinary and exact interest

Methods of counting time

The six percent method of computing ordinary interest

Present value and true discount

Summary and extension

Comparison of simple interest and simple discount rates

Rates of interest corresponding to certain discount rates in the terms of settlement

Comparing/Exchanging debts

Finding the date when the various sums (debts) due at different times be paid in one sum

To find the equated date of an account

Chapter II Questions

CHAPTER III – Intermediate Financial Mathematics B

PART B - COMPOUND INTEREST AND COMPOUND DISCOUNT

Compound interest

Compound interest formula

Nominal and effective rates of interest

Present value at compound interest

Equation of value

Equated time

Compound discount at a discount rate

Summary of interest and discount concepts

Chapter III – Questions

CHAPTER IV - Introductory Statistical methods

Statistical methods, a general primer for finance

What are statistics?

Data & data units

Data sources

Sourcing data directly

Sourcing data indirectly

From data to variables

Types of variables

Population and population parameters

Understanding data frequency

How are relative frequencies expressed?

Measures of central tendency

What is the mode?

What is the median?

What is the mean?

Shape and the distribution of the data – symmetry versus skewness

Kurtosis of the distribution

The impact of outliers

Frequency distribution

Types of probability distribution

Calculating the range

Calculating the quartiles and inter quartile range

Calculating the standard devation and variance

Data collection error estimates

How do we measure error?

What can measures of error tell us?

Data visualisation

Box and whisker plots

Scatterplots

Data analysis and interpretation

Conducting sound analysis

Determine appropriate analytical techniques and undertake data analysis

Graphical analysis

Summary statistical measures

Assess the results of analysis against the objectives and expectations

Chapter IV Questions

Chapter V - Banking and Deposit Taking with Australia and the U.S.

The Australian Banking Sector and the Authorised Deposit Taking Institution segment

Brief History

Core functions of a Bank

Settlement within the payments system

Credit quality enhancement

Sources and Uses of Funds

Banking products & Services

Key issue in banking - Asset Securitization

Major Banking Sector Entities

The Australian Banking sector and its 'Pillars'

Banking sector competition

Foreign owned banks

Credit Unions & Building Societies

Australian Sector Regulation

The U.S. Banking Sector and the Authorised Deposit Taking Institution segment

Introduction

Regulation of U.S. Depository Institutions in a Historical Context33

The National Bank Act of 1863 and the Creation of the "Dual Banking System"

The Federal Reserve Act of 1913

The Great Depression Legislation

The Bank Holding Company Act of 1956 and Savings and Loan Holding Company Act of 1967

The Savings & Loan Crisis and Related Legislation

The Gramm-Leach-Bliley Act of 1999

Commercial Banks

Bank Holding Companies and Financial Holding Companies

Thrifts

Credit Unions

Industrial Loan Companies

U.S Sector Regulation

Office of the Comptroller of the Currency

Office of Thrift Supervision

Federal Reserve

Federal Deposit Insurance Corporation

The Regulatory Process

System of Controls and Regulations

Consumer Protections

Coordination

Pricing Simple Banking Sector Instruments

The pricing of Certificates of Deposit

The Present Value of a loan installment (Amortising Loan)

The Face Value of a Bank Bill (Bill of Exchange)

Price of a Bank Bill (Bill of Exchange)

Chapter V Questions