2024

Financial Markets and Interest Rates

Name: Financial Markets and Interest Rates
Code: ECN10958M
6 ECTS
Duration: 15 weeks/156 hours
Scientific Area: Economy

Teaching languages: Portuguese
Languages of tutoring support: Portuguese, English
Regime de Frequência: Presencial

Presentation

This course aims to show the determinants of the various interest rates in the capital, monetary, foreign exchange and financial derivatives markets, and the way they are interrelated.

Sustainable Development Goals

Learning Goals

The main purpose of this curricular unit is to provide students with solid theoretical and empirical training in the area of ​​monetary and financial economics. It is also intended that they will be able to use this knowledge in analyzing the behavior of interest rates in different financial markets, their interrelationships and the influence of monetary policy. The expected learning outcomes are:
Know the different financial markets and the main interest rates determined there;
Know how to analyze the effect of monetary policy;
Know the relationships between different markets and interest rates;
Know how to analyze the common and idiosyncratic effects on market interest rates;

In this unit the following skills are developed:
Ability to analyze and be critical;
Decision-making and problem-solving ability;
Ability to transmit and receive ideas and information;
Ability to carry out investigation.

Contents

1. THE FINANCIAL SYSTEM
1.1. Functions of the Financial System
1.2. Structure of financial markets
1.3. Financing the economy
1.4. The yield curve and long-term interest rates
2. MONEY MARKET AND DETERMINATION OF SHORT-TERM INTEREST RATES
2.1. The intervention operations market
2.2. The interbank money market: determination of the overnight rate and euribor rates
3. CAPITAL MARKETS AND COMPANY FINANCING
3.1. Interest rates on banking operations: determination of active and passive interest rates
3.2. The stock and bond market: effects of monetary policy on the Stock Exchange and the bond market
4. FINANCIAL DERIVATIVES MARKET AND RISK PROTECTION
4.1. Options
4.2. Forwards and Futures
5. FOREIGN EXCHANGE MARKET AND INTERNATIONAL ECONOMIC RELATIONS
5.1. Spot operations market
5.2. Forward operations market
5.3. Foreign exchange derivatives market

Teaching Methods

The sessions are theoretical-practical, combining concepts with their application to concrete examples, encouraging the active participation of students in classes with discussion of practical work, real case studies and application exercises. Expository teaching is supported with the use of the board, multimedia presentations and the provision of various complementary teaching materials.

Assessment

- Final Exam Regime, with a test on all the contents taught;
or
- Continuous evaluation regime: combination of grades from two assessment tests, with identical weighting in the final classification

Recommended Reading



1.   ABREU, M., AFONSO, A., ESCÁRIA, V. e FERREIRA, C. (2012) Economia Monetária e Financeira, Escolar Editora, 2ª ed.. [336.76 ABR e]


2.   BANCO CENTRAL EUROPEU (2011) The monetary policy of the ECB (em português, ed. 2004), Banco Central Europeu. [www.ecb.int]


3.   BARATA, J. (2005) Moeda e Mercados Financeiros, 2ª ed., Edição do autor, ISEG. [(1998): 336.74 BAR m]


4.   BODIE, Z., KANE, A. and MARCUS, A. (2011) Investments and Portfolio Management, 9ª edition, McGraw-Hill. [2008: 336.76 BOD i]


5.   CECCHETTI, S. and SCHOENHOLTZ, K. (2014) Money, Banking and Financial Markets, 4ª ed., McGraw-Hill. [(2006) 336.7 CEC m]


6.   CHISHOLM, A. (2002) An Introduction to Capital Markets: products, strategies, participants, John Wiley & Sons.


7.    De HAAN, J., OOSTERLOO, S. and SCHOENMAKER, D. (2013) Financial Markets and Institutions: A European Perspective, 2ª ed., Cambridge University Press. [336.76 HAA f]


8.   ELTON, E.  e GRUBER, M. (2009) Modern Portfolio Theory and Investment Analysis, 8ª ed., John Wiley and Sons. [1995: 658.15 ELT m]


9.   FONSECA, J. (2010) Economia Monetária e Financeira, Imprensa da Universidade de Coimbra. [336.74 FON e]


10. HAUGEN, R. (2000) Modern Investment Theory, 5ª ed., Prentice-Hall International Editions. [(1997): 658.15 HAU]


11. HOWELLS, P. e BAIN, K. (2008) The Economics of Money, Banking and Finance: A European Text, 4th ed., Addison Wesley Longman. [(1998): 336.7 HOW m]


12. LEÃO, E., LEÃO, P. e LAGOA, S. (2009) Política Monetária e Mercados Financeiros, Edições Sílabo. [336.71 LEA p]


13. MENDONÇA, A., FAUSTINO, H., BRANCO, M. e FILIPE, J. (1998) Economia Financeira Internacional, McGraw-Hill. [336.74 MEN e]


14. MISHKIN, F., MATHEWS, K. and GIULIODORI, M. (2013) The Economics of Money, Banking, and Financial Markets, 10ª ed., Prentice Hall. [(1994): 336.7 MIS e]

Teaching Staff

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