FIN 3522 Financial Markets
FIN 3522 Financial Markets
Financial markets are instrumental to the workings of the economy. However, these markets do not exists in a vacuum but evolve from the interactions of market participants within the boundaries of market institutions. The importance of financial markets have grown over time, measured e.g by volume traded or the share of the total output of the economy. This, together with the recent financial crisis, has brought into light the importance how financial markets actually work.
The objective of this course is to provide an in-depth introduction to the workings of modern financial markets. There are many different players using these markets. On the one hand, corporations, governments, and other institutions use the financial markets to raise funds (i.e. borrow money) for capital investments. On the other hand, these funds are provided by private and institutional investors (by buying securities issued by corporations, or depositing money with banks, etc.) Banks and other financial institutions (e.g. pension or mutual funds, etc.) act as intermediaries between investors and borrowers.
More specifically, the course focuses on the mechanisms by which securities are traded in modern financial markets and the implications of trading mechanisms for the efficiency and liquidity of markets. It covers all major asset classes (money markets, equities, FX and bonds) and treats theoretical work on trading mechanisms and market outcomes, related empirical work and the application of microstructure analysis to practical trading scenarios. It closes with a focus on some topical issues in trading and market structure.
The students will acquire a good understanding of how different financial markets work, who are the most active market participants, and how market participants use different financial instruments. More specifically the students will develop their understanding with respect to the following topics:
- Understand market structures and their impact on price efficiency and liquidity
- Understand risks associated with trading, and how actual trading is conducted.
- Understand adverse selection risk, illiquidity risk, etc.
- Understand challenges for regulation of markets
The students will acquire skills that prepare them work which would involve trading, portfolio management or trade quality evaluation or for graduate work in this area. More specifically:
- Know the role of some specific market participants and institutions
- Know how to trade different financial instruments
- Be able to collect necessary financial data
The course will build on other, more theoretical courses, and aim to make the theory relevant in a practical setting. This will enable the student to operate in actual financial markets, e.g. in role as trader, asset manager or analyst.
- Introduction to financial markets: Fundamental principles of finance. Different markets and instruments.
- Intertemporal consumption (Fisher model)
- The financial system. Markets and institutions. Primary vs. Secondary markets
- Market participants: Governments, firms, funds, asset managers, banks, central banks, regulators, etc.
- Interest rates: Loanable funds equilibrium
- Delegated portfolio management. Active vs. passive investment
- Generic market structures (secondary markets)
- Market prices/Market liquidity
- Financial crises
- Issues and controversies in financial markets: algorithmic trading; transparency; regulation; fragmentation
The course will include a combination of lectures and presentations of actual events.
Specific Information regarding any aspect of student evaluation will be provided in class. It is the student's responsibility to obtain this information. Please note that whilst attendance is not compulsory, it is the students responsibility to obtain any information provided in class that is not included on the course homepage/It's learning or in the text book. Homepages and/or itslearning are not designed for the purpose of students who choose not to attend class.
Spreadsheets (Excel) will be used for certain practical applications and examples. It is recommended that students become familiar with their use. It will be explained how to use the Bloomberg terminal to collect and analyse financial data. The OANDA-trading platform will be utilized for familiarizing students with actual trading.
This is a course with continuous assessment (several exam components) and one final exam code. Each exam component is graded by using points on a scale from 0-100. The components will be weighted together according to the information in the course description in order to calculate the final letter grade for the examination code (course). Students who fail to participate in one/some/all exam elements will get a lower grade or may fail the course. You will find detailed information about the point system and the cut off points with reference to the letter grades when the course start.
At re-sit all exam components must, as a main rule, be retaken during next scheduled course.
The final grade in the course will be based on the following components and weightings:
- Compulsory home assignment. (20%)
- Compulsory presentation to be discussed in class (10%)
- 3 hours written exam. (70%)
Specific information regarding student evaluation beyond the information given in the course description will be provided in class.
Higher Education Entrance Qualification.
BØK 3423 Finance or equivalent.
| Assessments |
|---|
Exam category: Submission Form of assessment: Written submission Weight: 20 Grouping: Group/Individual (3 - 5) Duration: 2 Week(s) Comment: Bloomberg Exam code: FIN35221 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Activity Form of assessment: Presentation and discussion Weight: 10 Grouping: Group/Individual (3 - 5) Duration: 2 Week(s) Comment: Meeting / Presentation Exam code: FIN35221 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
Exam category: Submission Form of assessment: Written submission Invigilation Weight: 70 Grouping: Individual Support materials:
Duration: 3 Hour(s) Exam code: FIN35221 Grading scale: Point scale leading to ECTS letter grade Resit: All components must, as a main rule, be retaken during next scheduled course |
| Activity | Duration | Comment |
|---|---|---|
Teaching | 36 Hour(s) | |
Other in classroom | 6 Hour(s) | Bloomberg sessions |
Prepare for teaching | 83 Hour(s) | |
Group work / Assignments | 30 Hour(s) | |
Examination | 45 Hour(s) | Exam incl. preparations |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 7,5 ECTS credit corresponds to a workload of at least 200 hours.