ICM315-Fundamentals of Financial Markets

Module Provider: ICMA Centre
Number of credits: 10 [5 ECTS credits]
Level:7
Terms in which taught: Autumn term module
Pre-requisites:
Non-modular pre-requisites:
Co-requisites:
Modules excluded:
Current from: 2020/1

Email: a.dufour@icmacentre.ac.uk

Type of module:

Summary module description:

To provide an economic framework for the understanding of global financial markets,

organised exchanges, market players and the importance of liquidity and price efficiency.

Aims:

Participants will gain an understanding of the international stock and bond markets, ‘repo’

markets (for borrowing/ lending on a secured basis); an introduction to foreign exchange

and money markets, and to futures markets; finally, specific markets for commodity and

energy are presented.

Assessable learning outcomes:

By the end of the module, it is expected that students will:

Understand the main features of global financial markets in bonds, stocks, foreign exchange,

commodities and energy.

Be familiar with the structure of financial trading systems and with the characteristics of

major players in each market.

Be able to distinguish between exchange and OTC markets and between primary and

secondary markets in each asset or instrument

Understand the role of intermediaries, mark-to-market procedures, quotation conventions

and market mechanics

Understand the importance of liquidity and repo contracts.

Additional outcomes:

Outline content:

1.General introduction to world financial markets: geographically, by type of exchange, by issuers, liquidity and type of instruments.

a) Liquidity, the distinction between exchange versus OTC markets and the role of intermediaries in their various forms.

b) Primary and secondary markets. Market mechanics including types of orders, market participants, margin and short trades.

c) Market players and effect on liquidity and price effic iency.

2.Order book trading: Limit order versus market orders. Order matching and priority rules. Price setting rules.

3.Market microstructure theory: dealers - Glosten and Milgrom model. Market making, inventory management, asymmetric information and adverse selection.

4.Fixed income and foreign exchange markets

a)Short term debt securities issued by government and corporations. Classification of bonds according to issuer: government, agencies, corporate and municipal. Comparison of bond markets in major countries and a description of the main intermediaries and their role.

b)Foreign exchange market - quotation conventions, types of brokers, central banks' policies.

5.Futures, option and commodity markets:

a)A comparison of the main exchange traded markets, options on futures, specifications of the most popular contracts, trade orders for futu res contracts, mark-to-market procedure, and various expiration conventions.

b.Commodity and energy markets: Specific features, delivery and settlement methods, backwardation and contango, short squeezes and regulations. Price risks of oil, gas and electricity.

Global context:

The module explores global trends. International examples are used to illustrate key aspects of financial markets and regulation.Ìý

Brief description of teaching and learning methods:

Each topic is presented in a lecture. Two practical workshops are used to discuss and

experiment with some of the concepts introduced in the lectures.

Summative assessment- Examinations:

1.5 hours, closed-book written examination (70%)Ìý

Summative assessment- Coursework and in-class tests:

1-hour, multiple choice test (30%)Ìý

Formative assessment methods:

Seminar questions are assigned for each class. The seminar leader will facilitate discussion and offer feedback.Ìý

Penalties for late submission:
Penalties for late submission on this module are in accordance with the University policy. Please refer to page 5 of the Postgraduate Guide to Assessment for further information: http://www.reading.ac.uk/internal/exams/student/exa-guidePG.aspx

Assessment requirements for a pass:

50% weighted average markÌý

Reassessment arrangements:

Reassessment arrangements: By written examination only.Ìý 1.5 hour written examination.Ìý

Additional Costs (specified where applicable):

Last updated: 27 August 2020