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: 2022/3
Module Convenor: Dr Alfonso Dufour
Email: a.dufour@icmacentre.ac.uk
Type of module:
Summary module description:
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 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. Participants will learn how to compare alternative market structures.
Assessable learning outcomes:
By the end of the module, it is expected that students will be able to:
- Explain the structure of global financial markets in bonds, stocks, foreign exchange, commodities and energy and describe the role of major players, financial institutions and financial intermediaries.
- Distinguish primary and secondary markets in each asset or instrument
- Compare and contrast exchanges and OTC markets
- Explain mark-to-market procedures and quotation conventions
- Describe market mechanics (types of orders, market participants, order matching and auctions)
- Critically evaluate the importance of liquidity and price efficiency
Additional outcomes:
Students will be able to describe different firms in the industry, explain how they differ from each other and identify 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
- 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.
- Liquidity – Market vs. funding liquidity.
- Bank and capital market provision of funding.
- Environmental (in particular, climate change), social and governance issues in the banking and investment industries.
Section 2: Financial Markets and Trading
- General introduction to world financial markets: geographically, by type of exchange, by issuers, liquidity and type of instruments.
- Liquidity, the distinction between exchange versus OTC markets and the role of in termediaries in their various forms.
- Market players and their effect on liquidity and price efficiency.
- Order book trading: Limit order versus market orders. Order matching and priority rules. Price setting rules.
- Market microstructure theory: market making, inventory management, asymmetric information and adverse selection. The Glosten and Milgrom model.
- Fixed income markets - debt securities issued by gover nments, agencies, corporations and municipalities. Comparison of bond markets in major countries.
- Foreign exchange market - quotation conventions, types of brokers, central banks' policies.
- Futures and option markets: overview of the main exchange traded markets, specifications of the most popular contracts, mark-to-market procedures and various conventions.
- Commodity and energy markets: Specific features, delivery and settlem ent 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 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.
| Autumn | Spring | Summer | |
| Lectures | 20 | ||
| Seminars | 4 | ||
| Practicals classes and workshops | 2 | ||
| Guided independent study: | |||
| Wider reading (independent) | 54 | ||
| Wider reading (directed) | 20 | ||
| Exam revision/preparation | 20 | ||
| Preparation for seminars | 10 | ||
| Revision and preparation | 30 | ||
| Group study tasks | 30 | ||
| Reflection | 10 | ||
| Total hours by term | 200 | 0 | 0 |
| Total hours for module | 200 |
| Method | Percentage |
| Written exam | 80 |
| Project output other than dissertation | 20 |
Summative assessment- Examinations:
A 3-hour multiple-choice test: 80% of the total assessment mark (20 questions on topics presented in Section 1 and 40 questions on topics presented in Section 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 exam with 60 multiple-choice questions). Re-sit examination to be taken in August/September.
Additional Costs (specified where applicable):
Last updated: 29 March 2022
THE INFORMATION CONTAINED IN THIS MODULE DESCRIPTION DOES NOT FORM ANY PART OF A STUDENT'S CONTRACT.