Financial Markets

• Credit value: 30 credits at Level 6
• Convenor: Dr Ken Hori
• Assessment: a spreadsheet exercise and short essay (20%) and a three-hour examination (80%)

In this module we consider the main principles of finance. You will be introduced to equity, fixed income and derivatives markets, and become familiar with financial models that will enable you to evaluate different financial assets. You will also learn about option pricing theory, as well as issues related to credit risk.

This module equips you with the necessary knowledge of financial markets to prepare you to work as a practitioner in the finance industry.

By the end of the module, you should be able to:

• understand and make use of financial statements
• explain the time value of money and calculate present values of future cash flows and net present values of real investment projects
• understand the characteristics of equity, fixed income and derivative markets
• derive and apply pricing models for shares including the discounted-dividend model
• price bonds and extract interest rates from bond data
• understand different derivative securities such as forwards, futures, swaps and options
• explain the no-arbitrage principle and apply this to the pricing of derivative securities using both Black-Scholes option pricing model and the Binomial model
• understand the issues related to credit risk.