78159 - Financial Products and Markets

Learning outcomes

At the end of the course the student has a sound knowledge of the financial products traded in the market, the differences among them, and the reasons why they were introduced in the market. The products range from standard bonds and stocks, to derivatives and structured finance products. The student has knowledge of the main agents trading in the market, as fund raisers or investors, as well as financial intermediaries.

Course contents

The course starts by illustrating the role that financial markets play in the economy. Students are introduced to the key finance concepts of discounted cash flow (time value of money), no-arbitrage valuation, and market efficiency. Those concepts are then applied to the valuation of two asset classes: Fixed-income securities and financial derivatives. In detail:

• Valuation of risk-free fixed income assets (government bonds). The yield curve. Interest rate risk.
• Valuation of fixed income assets issued by risky entities (corporate bonds). Credit risk. Liquidity risk.
• Basic valuation of financial derivatives (forward/futures, swaps, options).
• Hedging risks with financial derivatives. Derivatives and speculation.

Readings/Bibliography

Z. Bodie, A. Kane and A. Marcus, Investments, 11th edition, McGraw Hill (selected chapters only).

Any other material that will be posted on IOL.

Teaching methods

Lectures and exercises.

Assessment methods

Written, closed-book exam, which consists of a combination of closed-ended questions and exercises.

Teaching tools

Slides

Exercises

Office hours

See the website of Mascia Bedendo