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ICM106 - Financial Markets

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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:
Current from: 2020/1

Module Convenor: Dr Alfonso Dufour

Email: a.dufour@icmacentre.ac.uk

Type of module:

Summary module description:

This module is delivered at ºÚ¹Ï³ÔÁÏÍø and ºÚ¹Ï³ÔÁÏÍø Malaysia.Ìý



This moduleÌýprovides an introduction toÌýcommercial and investment banks and an overview of the main characteristics and risks of a range of international financial markets: equity, fixed income, foreign exchange, futures and commodity markets. An interactive workshop is used to compare alternative market structures.Ìý


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 commercial and investment banks, the international credit, stock, bond and repo markets. Also, participants will learn about specific characteristics and risks of foreign exchange markets as well as futures markets, commodity and energy markets. Participants will learn how to compare alternative market structures.Ìý


Assessable learning outcomes:

By the end of the module, it is expected that students will have gained an understanding of the global financial system, financial intermediaries and the global financial markets in bonds, stocks, foreign exchange, commodities and energy, with reference to:Ìý




  • The structure of the global financial system, financial institutions and the functions of financeÌý

  • Primary and secondary markets in each asset or instrumentÌý

  • The distinction between exchange and OTC marketsÌý

  • The major players in each market and the role of intermediariesÌý

  • Mark-to-market procedures and quotation conventionsÌý

  • Market mechanics (types of orders, market participants, order matching and auctions)Ìý

  • The importance of liquidity and price efficiency


Additional outcomes:

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


Outline content:

Section 1: Commercial and Investment Banking & International Credit and Capital MarketsÌý




  • The fundamentals of finance – understanding the three pillars of finance, the meaning of transformation through intermediation, industry sectors and the structure of commercial and investment banks.Ìý

  • Liquidity – Market vs. funding liquidity.Ìý

  • Bank and capital market provision of funding.
  • Environmental (in particular, climate change), social and governance issues in the banking and investment industries.Ìý



Ìý



Section 2: Financial Markets and TradingÌý




  • General introduction to world financial markets: geographically, by type of exchange, by issuers, liquidity and type of instruments.Ìý

  • Liquidity, the distinction between exchange versus OTC markets and the role of intermediaries in their various forms.Ìý

  • Market players and their effect on liquidity and price efficiency.Ìý

  • Order book trading: Limit order versus market orders. Order matching and priority rules. Price setting rules.Ìý

  • Market microstructure theory: market making, inventory management, asymmetric information and adverse selection. The Glosten and Milgrom model.Ìý

  • Fixed income markets - debt securities issued by governments, agencies, corporations and municipalities. Comparison of bond markets in major countries.Ìý

  • Foreign exchange market - quotation conventions, types of brokers, central banks' policies.Ìý

  • Futures and option markets: overview of the main exchange traded markets, specifications of the most popular contracts, mark-to-market procedures and various conventions.Ìý

  • Commodity and energy markets: Specific fea tures, delivery and settlement methods, backwardation and contango, short squeezes and regulations. Major risks affecting oil, gas, and electricity prices.Ìý


Global context:

This module focuses on US and European markets but also refers to major markets in other countries.Ìý


Brief description of teaching and learning methods:

All topics are presented and discussed in the lectures. A 2-hour, interactive workshops is used to experiment with some of the concepts introduced in the lectures. In the seminars,Ìýparticipants will discuss and solve non-assessed coursework set by the instructors.Ìý


Contact hours:
Ìý Autumn Spring Summer
Lectures 20
Seminars 3
Practicals classes and workshops 2
Guided independent study: Ìý Ìý Ìý
Ìý Ìý Wider reading (independent) 55
Ìý Ìý Wider reading (directed) 20
Ìý Ìý Exam revision/preparation 20
Ìý Ìý Preparation for seminars 10
Ìý Ìý Revision and preparation 30
Ìý Ìý Group study tasks 30
Ìý Ìý Reflection 10
Ìý Ìý Ìý Ìý
Total hours by term 200 0 0
Ìý Ìý Ìý Ìý
Total hours for module 200

Summative Assessment Methods:
Method Percentage
Written exam 80
Project output other than dissertation 20

Summative assessment- Examinations:

A 2-hour written exam (essay questions): 80% of the total assessment mark (1 question on topics presented in Section 1 and 2 questions on topics presented in Section 2)Ìý


Summative assessment- Coursework and in-class tests:

A 2,500-word group project: 20% of the total final assessment mark


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.aspxÌý


Assessment requirements for a pass:

A minimum total mark of 50% for the module


Reassessment arrangements:

By examination only: a 2-hour written exam (essay questions).ÌýRe-sit examination to be taken in August/September.


Additional Costs (specified where applicable):

Last updated: 2 September 2020

THE INFORMATION CONTAINED IN THIS MODULE DESCRIPTION DOES NOT FORM ANY PART OF A STUDENT'S CONTRACT.

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