1 / 28

THE NOTION AND FUNCTIONS OF FINANCE

THE NOTION AND FUNCTIONS OF FINANCE. Dr Katarzyna Sum Chair of International Finance Warsaw School of Economics. Getting started. Slides available at: http://akson.sgh.waw.pl/~ksum/ Contact: ksum@sgh.waw.pl Office hours: Monday 9.30 in Klub Jajko. Final note. Multiple choice test

isabelle-hopper
Download Presentation

THE NOTION AND FUNCTIONS OF FINANCE

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. THE NOTION AND FUNCTIONS OF FINANCE Dr Katarzyna SumChair of International FinanceWarsaw School of Economics Finance 110631-1165

  2. Getting started Slides available at: http://akson.sgh.waw.pl/~ksum/ Contact: ksum@sgh.waw.pl Office hours: Monday 9.30 in Klub Jajko Finance 110631-1165

  3. Final note • Multiple choice test • The scope of the exam- the syllabus available at http://akson.sgh.waw.pl/~ksum/ Finance 110631-1165

  4. Broad lecture outline • Public finance • Corporate finance • International finance • Behavioural finance Finance 110631-1165

  5. Basic literature • R.W.Melicher, E.A.Norton, Introduction to Finance. Markets, Investments and Financial Management, John Wiley&Sons,2007; • A.Shleifer, Inefficient Markets, An Introduction to Behavioral Finance, Oxford University, 2000; • S.A.Ross,R.W.Westerfield, B.D.Jordan, Fundamentals of Corporate Finance, McGraw Hill Companies, N. York, 2006; Finance 110631-1165

  6. The notion of finance • Finance- a part of economics concerned with the analysis of monetary flows • Finance as a process related to monetary flows Finance 110631-1165

  7. Financial phenomenon vs. monetary phenomenon • Financial phenomena are related to monetary flows between the respective market players • Each financial phenomenon is a monetary phenomenon but not every monetary phenomenon is a financial phenomenon Finance 110631-1165

  8. Examples of monetary and financial phenomenons • Financial phenomenon- the accumulation of savings, the purchase of goods or services • Monetary phenomenon- inflation, currency appreciation Finance 110631-1165

  9. The functions of money • Medium of exchangee.g. transactions • Unit of account- e.g. transactionvaluation • Store of valuee.g. investments and savings Finance 110631-1165

  10. The functions of finance • Medium of allocation- investments and saving • Medium of distribution- e.g. transactions Finance 110631-1165

  11. The classification of financial phenomena • Classification according to market players • Classification according to subject of monetary flows Finance 110631-1165

  12. Classificationaccording to market players • Monetary flows between: • Households • Public institutions • Insurance companies • Banks and other financial institutions • Companies Finance 110631-1165

  13. Classificationaccording to subject of monetaryflows • Market monetary flows eg. payment of wages, payment for goods and services- shaped by demand and supply • Redistribution or transfer flows- eg. taxes, subsidies- shaped by legal acts • Credit flows- loans from banks • Savings- frozen monetary flows Finance 110631-1165

  14. The financial system (1) • A set of legal regulations, principles and institutions, which are necessary for the right fulfilment of the functions of finance and their regulation Finance 110631-1165

  15. The financial system (2) • Legal regulations- rules laid down in the economic and financial legal acts • Organisatory principles- resulting from economic theory and practice eg. the principle of budgetary equilibrium • Institutions, the activity of which is focused on finance eg. the ministry of finance, banks Finance 110631-1165

  16. The financial system (3) • The budgetary system • The banking system • The insurance system • The corporate finance system • The household finance system Finance 110631-1165

  17. The financial market Miejsce spotkania popytu i podaży produktów finansowych Główne segmenty: Rynek pieniężny Rynek kapitałowy Rynek walutowy Rynek derywatów Finanse 110630-1165

  18. The financial market The aggregate of demand and supply of financial products Main segments: The money market The capital market The foreign exchange market The derivatives market Finanse 110630-1165

  19. Financial policy • An element of the economic policy • Fiscal policy- the management of the public sector income and expenses (local and central government) • Monetary policy- stabilization of the purchasing power of domestic currency Finance 110631-1165

  20. Financial supervision • Banking supervision • Supervision of insurance companies • Pension system supervision • Capital market supervision • Centralized supervision (all functions are carried out by one institution) decentralized- many institutions Finance 110631-1165

  21. Corporate finance Ways of financing enterprises and ways of capital provision Financial reporting Financial analysis Company vaulation Finance 110631-1165

  22. Public finance Public income and expenditure Ways of financing the public finance sector Deficit and public debt servicing Finance 110630-1165

  23. Behavioural finance (1) Financial processes viewed as a consequence of market participants behaviour Abstracting from the classical finance assumptions i.e. from rational expectations and market effectiveness Finance 110631-1165

  24. Behavioural finance(2) Examples: Financial markets modelling (taking into account speculative bubbles) Valuation of equity securities e.g. taking into account various reactions of the investors Exchange rate forecasting e.g. with risk premia Explaining financial crises Finance 110631-1165

  25. International finance (1) • Finance is international per se! • The functions of finance fullfilled internationally • International financial institutions: central banks, public institutions, private enterprises, banks, households which are active on international financial markets Finance 110631-1165

  26. International finance(2) • The role of banks in servicing international financial transactions • International regulations of finance • National regulations, supranational regulation (EU), guidelines of international institutions (Basel Committee) Finance 110631-1165

  27. International money L. Oręziak, Euro nowy pieniądz, PWN, Warszawa 2002. Finance 110631-1165

  28. Literature • R.W.Melicher, E.A.Norton, Introduction to Finance. Markets, Investments and Financial Management, John Wiley&Sons,2007 Finance 110631-1165

More Related