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: 2019/0

Email: a.dufour@icmacentre.ac.uk

Type of module:

Summary module description:

This module is delivered at University of Reading and University of Reading Malaysia.

This module provides an introduction to commercial 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 simulate trading and compare alternative market structures.

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. An interactive workshop is used to simulate trading and compare alternative market structures.

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:

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  The structure of the global financial system, financial institutions and the functions of finance

  
  


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  Primary and secondary markets in each asset or instrument

  
  


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  The distinction between exchange and OTC markets

  
  


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  The major players in each market and the role of intermediaries

  
  


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  Mark-to-market procedures and quotation conventions

  
  


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

  
  


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  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.

Outline content:

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

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  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.

  
  


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  Liquidity – Market vs. funding liquidity.

  
  


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  Bank and capital market provision of funding liquidity, securitisation, shadow banks.

  
  

Section 2: Financial Markets and Trading

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

  
  


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

  
  


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  Market players and their effect on liquidity and price efficiency.

  
  


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

  
  


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

  
  


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

  
  


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

  
  


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

  
  


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

  
  

Global context:

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

Brief description of teaching and learning methods:

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

Summative assessment- Examinations:

A 3-hour multiple-choice test: 80% of the total assessment mark (30 questions on topics presented in Session 1 and 50 questions on topics presented in Session 2)

Summative assessment- Coursework and in-class tests:

A 2,500-word group project: 20% of the total final assessment mark (due in week 11 of the Autumn term).

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.aspx

Assessment requirements for a pass:

A minimum total mark of 50% for the module

Reassessment arrangements:

By examination only (a 3-hour test with 80 multiple-choice questions). Re-sit examination to be taken in August/September.

Additional Costs (specified where applicable):
1) Required text books:
2) Specialist equipment or materials:
3) Specialist clothing, footwear or headgear:
4) Printing and binding:
5) Computers and devices with a particular specification:
6) Travel, accommodation and subsistence:

Last updated: 8 April 2019