ICM106-Financial Markets

Module Provider: ICMA Centre
Number of credits: 20 [10 ECTS credits]
Level:7
Terms in which taught: Autumn term module
Pre-requisites:
Non-modular pre-requisites:
Co-requisites:
Modules excluded:
Module version for: 2017/8

Module Convenor: Dr Alfonso Dufour

Email: a.dufour@icmacentre.ac.uk

Summary module description:

This module is delivered at University of Reading and University of Reading Malaysia



To provide an economic framework for understanding global financial markets, financial institutions, market players and the importance of liquidity and price efficiency. Participant 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 (which are developed in more detail in optional Part 2 modules); finally specific markets for commodity and energy are studied in more detail.


Aims:
To provide an economic framework for understanding the global financial system and global financial markets, financial institutions, market players and the importance of liquidity and price efficiency. 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 (which are developed in more detail in optional Part 2 modules); finally specific markets for commodity and energy are studied in more detail.

Assessable learning outcomes:
By the end of the module, it is expected that students will have gained an understanding of the global financial system and the global financial markets in bonds, stocks, foreign exchange, commodities and energy, with reference to: - The structure of the global financial system and the function of finance - The major players in each market - The role of intermediaries - Mark-to-market procedures - Quotation conventions - Market mechanics (types of orders, market participants, margin and short trades) - The importance of liquidity and repo - The distinction between exchange and OTC markets - Primary and secondary markets in each asset or instrument

Additional outcomes:
Students should become familiar with different firms in the industry, how they differ from each other and the different careers available within the industry as an aid to their own career development.

Outline content:
Section 1 - Professor Brian Scott-Quinn - The global financial system - a functional approach - financing, liquidity provision, risk management (including portfolio diversification), payments systems and clearing and settlement, the financial industry and economic efficiency, regulation, the structure of the industry, financing failures - banking crisis and sovereign debt crisis. Section 2 - Dr Alfonso Dufour - General introduction to world financial markets: geographically, by type of exchange, by issuers, liquidity and type of instruments. - Liquidity, the distinction between exchange versus OTC markets and the role of intermediaries in their various forms. - Primary and secondary markets. Market mechanics including types of orders, market participants, margin and short trades. - Market players and effect on liquidity and price efficiency. - Market microstructure theory: dealers - Glosten and Milgrom model. Market making, inventory management, asymmetric information and adverse selection. - Order book trading: Limit order versus market orders. Order matching and priority rules. Price setting rules. - Fixed income markets - 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. - Foreign exchange market - quotation conventions, types of brokers, central banks’ policies. - Futures and option markets: a comparison of the main exchange traded markets, options on futures, specifications of the most popular contracts, trade orders for futures contracts, mark-to-market procedure, and various expiration conventions. - Commodity and energy markets: Specific features, delivery and settlement methods, backwardation and contango, short squeezes and regulations. Price risks of oil and gas, electricity, coal.

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.

Contact hours:
  Autumn Spring Summer
Lectures 20
Seminars 2
Practicals classes and workshops 10
Guided independent study 168
       
Total hours by term 200.00
       
Total hours for module 200.00

Summative Assessment Methods:
Method Percentage
Written exam 80
Written assignment including essay 20

Other information on summative assessment:
Written Assignment (Group Project): 20%
Written Exam (Final Multiple Choice Test): 80% (30% on Section 1 and 50% on Section 2)

Formative assessment methods:

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

Length of examination:
3 hours.

Requirements for a pass:
Requirements for a pass: 50% weighted average mark

Reassessment arrangements:
By examination only, as part of the overall examination arrangements for the MSc programme.

Additional Costs (specified where applicable):
1) Required text books:
2) Specialist equipment or materials:
3) Specialist clothing, footwear or headgear:
4) Printing and binding:
5) Computers and devices with a particular specification:
6) Travel, accommodation and subsistence:

Last updated: 31 March 2017

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