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.

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 Virtuale.

Teaching methods

Lectures and exercises.

Assessment methods

30% of the grade: Groupwork to be handed in by the last session date. The grade received on the groupwork remains valid for the entire academic year.

70% of the grade: Written, closed-book exam, which consists of a combination of true/false questions, open-ended questions and exercises.

Teaching tools

Slides

Exercises

Office hours

See the website of Mascia Bedendo