ICM331-Securities and Investments

Module Provider: ICMA Centre
Number of credits: 30 [15 ECTS credits]
Terms in which taught: Autumn term module
Non-modular pre-requisites: This module builds on the content covered in the pre-sessional module 'Building Blocks of Finance' and students are expected to have completed this pre-sessional module prior to the start of ICM331
Modules excluded:
Current from: 2023/4

Module Convenor: Dr Miriam Marra
Email: m.marra@icmacentre.ac.uk

Module Co-convenor: Dr Nadia Kappou
Email: k.kappou@icmacentre.ac.uk

Type of module:

Summary module description:

This module focuses on cash securities evaluation (fixed income, equity, and FX) and the use of these securities for investments (derivatives and portfolio theory). 

Part I of the module applies general valuation methods to specific financial instruments: fixed income, equity securities, and FX. It describes the characteristics of each security/market and develops practical strategies for finding its value and assessing its risk. 

Part II of the module provides an in-depth introduction to financial derivatives (futures and options) and their valuation. 

Part III of the module analyses the main framework behind portfolio theory and optimum asset allocation, followed by the introduction of the main pricing models, their applications and limitations. 

Students also get an insight into trading through Equity and FX trading simulation sessions (INVEST sessions) on ICTrader, the ICMA Centre’s trading simulation. In the weekly 2 hour sessions, students manage Equity and FX trading risk as market makers. 


The module deals with the valuation of fixed income and equity securities. It focuses on the basic characteristics of each security and the strategies used for approximating their fundamental value and assessing their risk. Its primary aim is to discuss how certain characteristics and relationships can affect the value of fixed income and equity securities and how can they be exploited to form optimal investment strategies. Further, it introduces the topic of exchange rates and currency risk. The module also develops ways of optimally selecting portfolios of assets and develops models of how these portfolios may be priced in financial markets. Through a detailed overview of derivatives instruments, their characteristics and valuation, it is shown how they can enhance portfolio returns and help in the management of investment risk. The analytical techniques introduced in this module are widely applied in other elements of the programme.

Assessable learning outcomes:

For Part I of the module, students will be able to:

  • apply time value of money in calculating security values; 

  • describe the basic characteristics of debt securities, 

  • calculate prices and yields for fixed income securities; 

  • interpret credit ratings and describe how credit risk is affected by restrictions contained in the bond indentures; 

  • derive zero-coupon yields from bond prices and calculate the forward rates associated with those yields; 

  • define, construct and apply duration-based measures of interest rate risk; 

  • discussthe difference between interest rate risk and credit risk; 

  • outline the FX markets, currencies’ fluctuations, the nature of currency risk, and the relationship between countries’ exchange rates and interest rates,

  • relate macroeconomic policy and leading economic indicators to security returns; 

  • apply basic microeconomic analysis in assessing the market prospects of industries and individual firms; 

  • use financial statement information to construct financial ratios relevant to security selection; 

  • use the cash flow, dividend discount models as well as market multiple techniques to value equities.

For Parts II and III of the module, students will be able to:

  • explain  the theoretical basis for the economic analysis of risk; 

  • assess the characteristics of individual assets and portfolios of risky assets; 

  • construct the mean-variance efficient frontier and identify the optimal risky portfolio for a given universe of risky assets; 

  • explain the role of beta as a risk measure in the capital market equilibrium described by the CAPM; 

  • apply  the use of the no-arbitrage principle to the pricing of risky assets and describe the basic features of the arbitrage pricing theory (APT); 

  • describe  the fundamentals of forward and futures contracts, their valuation and use in simple hedging strategies; describe financial options, their characteristics and valuation.

Apply their knowledge to  real world pricing and trading strategies (INVEST trading simulations sessions).

Additional outcomes:

The student will develop familiarity with sources of financial market data and gain experience in manipulating and analysing this data in ways closely related to market practice. The student will learn to relate economic news to price changes in financial markets. The seminars and discussion board will provide students with an opportunity to propose and defend explanations for the observed behaviour of investors, traders and market intermediaries and the resulting pattern of returns on risky assets.

Outline content:

Part I:  Securities and Valuation

  • Topic 1. Fixed Income: Bond prices and yields. Introduction to default risk.

  • Topic 2. Fixed Income: Term structure of interest rates.

  • Topic 3. Fixed Income: Interest rate risk and essentials of risk management.

  • Topic 4. Equities: Economic and industry analysis 

  • Topic 5. Equities: Financial statement analysis

  • Topic 6. Equities: Valuation 

  • Topic 7. FX: Exchange rate and the FX market; FX Depreciation/Appreciation; PPP and CIP conditions. 

Part II: Portfolio Theory and Asset Pricing 

  • Topic 8. Choice and Uncertainty 

  • Topic 9. Portfolio Theory 

  • Topic 10. The Capital Asset Pricing Model 

  • Topic 11. Multi-factor Models 

  • Topic 12. APT and Applications 

  • Topic 13. Efficient Market Hypothesis 

Part III: Derivatives

  • Topic 14. Forward, Futures and Options 

  • Topic 15. Option Pricing 

Brief description of teaching and learning methods:

The module combines several teaching and learning methods to help students achieve the stated objectives:

1. Weekly Lectures

2. Additional readings provide current and applied examples of the topics.

3. Tutorials: students meet in small groups for a series of seminars. Discussions are based on non-assessed coursework set by the instructors. Some seminars are based on case study type exercises.

4. Discussion board: Blackboard Learn may be used to maintain a discussion board relating to the module where the instructors would post discussion threads and moderate the forum.

5. Practical trading simulations sessions (INVEST sessions) with Grade Point Cash counting towards the final grade. Students gain an understanding of how securities are traded and used by investors.

The reference textbook for this module is:

“Investments” by Zvi Bodie, Alex Kane, Alan J. Marcus 

Additional reading for the derivatives-related topics:

Options Futures and Other Derivatives, by John C. Hull, Pearson

Contact hours:
  Autumn Spring Summer
Lectures 30
Seminars 15
Practicals classes and workshops 20
Guided independent study:      
    Wider reading (independent) 15
    Wider reading (directed) 40
    Exam revision/preparation 70
    Advance preparation for classes 30
    Preparation for seminars 30
    Carry-out research project 50
Total hours by term 300 0 0
Total hours for module 300

Summative Assessment Methods:
Method Percentage
Written exam 60
Written assignment including essay 30
Practical skills assessment 10

Summative assessment- Examinations:

One closed-book Final Written Examination (Multiple-Choice Questions exam of 3 hours length). (60%)

The examination for this module will require a narrowly defined time window and is likely to be held in a dedicated exam venue.

Summative assessment- Coursework and in-class tests:

One group assignment; group project (up to 6 students in each group) assessing both theoretical and practical elements of the module (written report of up to 2,500 words) (30%).The submission date is within the last teaching week of the Autumn term.

INVEST (ICTrader) mark  of two assessed trading sessions- each trading assessment (test) counts for 5% of the overall module grade. The trading assessments take place in the last 2 weeks of the Autumn term in the usual trading seminar timetable slots.

Formative assessment methods:



Penalties for late submission:

The below information applies to students on taught programmes except those on Postgraduate Flexible programmes. Penalties for late submission, and the associated procedures, which apply to Postgraduate Flexible programmes are specified in the policy “Penalties for late submission for Postgraduate Flexible programmes”, which can be found here: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/cqsd-old-site-documents/penaltiesforlatesubmissionpgflexible.pdf

The Support Centres will apply the following penalties for work submitted late:

  • where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of five working days;

  • where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/cqsd-old-site-documents/penaltiesforlatesubmission.pdf

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.


Assessment requirements for a pass:

50% weighted average mark.


Reassessment arrangements:

By written examination only as part of the overall examination arrangements for the MSc programme.


Additional Costs (specified where applicable):

Computers and devices with a particular specification: £15

Last updated: 5 April 2023


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