International Banking and Financial Instruments
Module overview
This is a Level 6 core module for the course BSc Economics, Finance and Banking. This is an optional module for Level 6:
- BA Economics and Management
- BA European Business
- BSc Business Economics
- BSc Economics
This module is very popular due to the breadth of topics and the connections to current issues in international banking management and operations. There are no prerequisites:
- a concise introduction to banking will assist students who have not previously taken a banking course;
- the mathematics and quantitative methods skills developed at Level 4 will be adequate to understand and apply the financial instruments introduced in the programme.
In short, the essence of international banking is about (1) operating across jurisdictions (legal, legislative, regulatory, monetary) and (2) facing exposure to a variety of risks (country, sovereign, geopolitical, climate) in addition to the three main categories of credit, market and operational risk. In such circumstances, it is necessary to have an understanding of the regulatory and operational frameworks and of the suitability of selected financial instruments to effectively hedge against risk and to optimise the outcome of financial transactions.
In the stream International Banking we will review the basic functioning of banking and monetary systems, to then explore the opportunities and challenges of international operations, and to finally examine risk management in the context of Global-Sistemically Important Banks (G-SIBs). The exposure to the relevant, deriving risks will require the introduction of mitigating measures such as regulatory compliant capital and liquidity; at operational elevel, such mitigating measures will constitute the core of the stream Financial Instruments, in which we will introduce, discuss and apply swaps, options, forward and futures, for example, to realistic scenarios.
Aims
- To outline the difficulties and opportunities of financial risk management and banking on an international scale.
- To investigate comparative institutional and policy approaches to the regulation of international banking and financial markets.
- To provide an understanding of future, forwards, swaps and options markets.
Learning outcomes
On successful completion of this module, students should be able, at threshold level, to:
- Show understanding of the functions and complexity of international banking and financial markets by addressing a realistic problem scenario.
- Organise and present appropriate data to frame a problem in the area of banking and finance and identify a solution.
- Show understanding of the issues surrounding the effective regulation of financial systems.
- Critically evaluate and demonstrate knowledge of the empirical research literature in the area.
- Implement strategies involving financial derivatives in measurement and management of financial risk, hedging, speculation, and arbitrage.
Teaching and planned activities
The module is delivered via a combination of 22 lectures and 22 seminars over one term of 11 weeks. The programme is structured such that the two streams (International Banking and Financial Instruments) are delivered in parallel.
Lectures concentrate on introducing concepts,theories, information and practices relevant to international banking and financial instruments.
Seminars are structured to develop an understanding of the material introduced in the lectures, to offer opportunities for formative assessment in practicing techniques introduced in the lectures and to critically review contemporary issues.
Assessment
- Coursework 1 (IB) - 25%
- One 1,000-word individual essay that addresses the learning outcomes 1, 2, 3 and 4.
- Coursework 2 (FI) - 25%
- One 1,000-word individual essay that addresses the learning outcomes 1, 2, 4 and 5.
- Coursework 3 (IB - FI) - 50%
- A portfolio of four online quizzes that addresses the learning outcomes 1, 2, 3 and 5.
Programme outline
International Banking
| Week | Lecture | Seminar |
|---|---|---|
| 1 | International banking | What is banking |
| 2 | IB services | International Banking |
| 3 | Banking systems | IB services |
| 4 | Central banking | Banking systems |
| 5 | Regulation of banks | Central banking |
| 6 | Banking risks | Regulation of banks |
| 7 | Banking risks management I | Banking risks |
| 8 | Banking risks management II | Banking risks management I |
| 9 | International financial architecture | Banking risks management II |
| 10 | Green and ethical finance | International financial architecture |
| 11 | Overview | Green and ethical finance |
Financial Instruments
| Week | Lecture | Seminar |
|---|---|---|
| 1 | Introduction | Introduction |
| 2 | Interest rates, bonds | Introduction and interest rates |
| 3 | Term structure and interest rate | Interest rates, bonds |
| 4 | Foreign exchange markets I | Term structure and interest rate |
| 5 | Foreign exchange markets II | Foreign exchange markets I |
| 6 | International parities I | Foreign exchange markets II |
| 7 | International parities II, futures and options | International parities I |
| 8 | Managing transaction exposure | International parities II, futures and options |
| 9 | Swaps | Managing transaction exposure |
| 10 | Other financial instruments & crises | Swaps |
| 11 | Revision | Other financial instruments & crises |
Reading list
We will use the following textbooks for general reference and will access original sources (banks, central banks, the Bank for International Settlements, the IMF, the World Bank, the OECD and S&P Global) to find current data and other relevant information on the various topics of the programme.
- Mishkin, F (2018). The economics of money, banking and financial markets (13th edition, Global Edition). Pearson
- Casu, B, Girardone, C, Molyneux, P. (2015). Introduction to banking (2nd edition). Pearson
- Hull, J. (2016). Fundamentals of futures and options markets (8th edition, global edition). Pearson
- Arnold, G. (2014). FT Guide to Banking. Pearson