FINANCIAL ECONOMICS

Content

Weeks	Topics
1. Weeks	Week 1 – Introduction to the Financial System - Definition and economic functions of the financial system - Financial system and the real economy - Savers, borrowers, and flow of funds - Financial intermediation - Major types of financial markets - Money and capital markets - Primary and secondary markets - Overview of financial instruments - Basic features of the Turkish financial system Textbook: Chapter 1 – An Introduction to Financial System
2. Weeks	Week 2 – Financial Stability and Financial Crises - Concept and major dynamics of financial crises - Risk perception and risk aversion - Role of interest rate and exchange rate movements - Financial crises and economic activity - Concept of financial stability - Micro-financial stability - Macrofinancial stability - Systemic risk Textbook: Chapter 2 – Financial Stability, Regulation, and Supervision
3. Weeks	Week 3 – Financial Regulation, Supervision and Macroprudential Policies - Rationale for financial regulation and supervision - Microprudential policies - Macroprudential policies - Financial architecture - Role of the banking system in financial stability - Monetary policy and financial stability - Role of central banks in financial stability - Financial stability in Türkiye Textbook: Chapter 2 – Financial Stability, Regulation, and Supervision
4. Weeks	Week 4 – Risk and Return in Financial Economics - Concept of financial return - Simple returns - Single- and multi-period returns - Logarithmic returns - Risk-free rate and equity premium - Expected return - Distribution of financial returns - Mean, variance, and standard deviation - Skewness and kurtosis Textbook: Chapter 3 – Risk and Return in Financial Economics
5. Weeks	Week 5 – Portfolio Theory and Risk Management - Portfolio return and portfolio risk - Risk-return trade-off - Covariance and correlation - Two-asset portfolios - Multi-asset portfolios - Portfolio diversification - Risk reduction through diversification - Optimal portfolio approach - Markowitz efficient frontier Textbook: Chapter 3 – Risk and Return in Financial Economics
6. Weeks	Week 6 – Interest Rates and the Time Value of Money - Timing of cash flows - Simple and compound interest - Future value - Present value and discounting - Annuities - Perpetuities - Nominal and real interest rates - Inflation and interest rates - Calculation of real interest rates Textbook: Chapter 4 – Interest Rate Calculations
7. Weeks	Week 7 – Midterm Exam Preparation - Comprehensive review of Weeks 1–6 - Financial system and financial markets - Financial stability and financial crises - Micro- and macroprudential policies - Risk and return calculations - Portfolio diversification - Interest rates and the time value of money - Problem solving and sample questions MIDTERM EXAM
8. Weeks	Week 8 – Investment Evaluation - Investment decisions and cash flows - Net Present Value (NPV) - Net Present Value Ratio (NPVR) - Profitability Index (PI) - Internal Rate of Return (IRR) - Comparison of NPV and IRR - Modified Internal Rate of Return (MIRR) - Payback Period - Discounted Payback Period Textbook: Chapter 5 – Investment Evaluation
9. Weeks	Week 9 – Derivative Markets: Forwards and Futures - Basic features of derivative markets - Spot and derivative markets - Exchange-traded and over-the-counter markets - Forward contracts - Counterparty risk - Futures contracts - Margin mechanism - Hedging - Futures markets in Türkiye Textbook: Chapter 6 – Introduction to Derivative Markets
10. Weeks	Week 10 – Options, Swaps and Financial Hedging - Basic features of option contracts - Call and put options - Basic option positions - Hedging with options - Swap contracts - Types of swaps - Management of interest rate and exchange rate risks - Corporate financial hedging Textbook: Chapter 6 – Introduction to Derivative Markets
11. Weeks	Week 11 – Financial Statements and Stock Valuation - Basic financial statements - Balance sheet - Income statement - Cash flow statement - Tools of financial analysis - Basic features of stocks - Principles of stock valuation - Dividend Discount Model (DDM) - Relative valuation - Market efficiency Textbook: Chapter 7 – Financial Statements and Stock Valuation
12. Weeks	Week 12 – Bond Valuation and Yield - Basic features of bonds - Bond pricing - Coupon and zero-coupon bonds - Yield to Maturity (YTM) - Real Yield to Maturity - Bond price-interest rate relationship - Effects of maturity and coupon rates on bond prices - Interest rate risk - Duration - Convexity Textbook: Chapter 8 – Bond Valuation and Term Structure of Interest Rates
13. Weeks	Week 13 – Term Structure of Interest Rates and the Yield Curve - Term structure of interest rates - Spot rates - Forward rates - Yield curve - Different shapes of the yield curve - Expectations hypothesis - Inflation expectations and interest rates - Inflation-indexed bonds - Monetary policy and the yield curve - Term structure of interest rates in Türkiye Textbook: Chapter 8 – Bond Valuation and Term Structure of Interest Rates
14. Weeks	Week 14 – Final Exam Preparation and Comprehensive Review - Integration of the core concepts of the course - Financial system and financial stability - Risk, return, and portfolio relationship - Interest rates, present value, and investment decisions - Derivatives and risk management - Financial statements and stock valuation - Interest rates, bond prices, and the yield curve - Quantitative problem solving - Conceptual and applied sample questions FINAL EXAM