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 time value of money and no-arbitrage valuation. These concepts are 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.
• Valuation of financial derivatives (forward/futures, swaps, options).
• Hedging risks with financial derivatives. Derivatives and speculation.
• Financial products for climate change.

Exchange students interested in taking this course must have an academic background in economics or finance and prerequisite knowledge of microeconomics and econometrics.

Readings/Bibliography

Required readings:

Z. Bodie, A. Kane and A. Marcus, Investments, 11th edition, McGraw Hill (selected chapters only, as indicated in the slideset).

Any other material that will be posted on Virtuale.

Teaching methods

Lectures, exercises, groupwork.

Assessment methods

Course assessment:

- Groupwork to be handed in by the last session date. Detailed information on the groupwork will be posted on Virtuale in the first weeks of the course.

- Written, closed-book exam, which consists of a combination of true/false questions, open-ended questions and exercises. A mock exam will be provided on Virtuale.

The groupwork counts for 30% of the grade of Financial Products and Markets only if the written exam is taken by September, otherwise the grade is 100% based on the written exam.

The maximum possible score on the overall exam is 30 cum laude, in case all answers are correct, complete and formally rigorous. The grade distribution is as follows:
<18 failed
18-23 sufficient
24-27 good
28-30 very good
30 cum laude excellent

The final grade of Finance I.C. is the simple average of the grade of Financial Products and Markets and the grade of Asset Pricing.

Teaching tools

Course page on the platform "Virtuale", where students can find:

• lecture slides
• mock exams
• other reading material.

Office hours

See the website of Mascia Bedendo