CO2080 Financial Markets
- Juan Carlos Arismendi Zambrano
- Sep 13, 2017
- 3 min read
Objectives
In this course of introductory level in finance, the student will be able to understand the time value of the money and be able to identify and value financial market transactions (trading - buy/sell), with the purpose of corporate capital funding. The student will apply theoretical models and techniques used in financial markets for investment - funding decisions and to analysis the different instruments, principles, and portfolio management strategies.
Course Program
1. INTRODUCTION (1 week) (a) Financial Markets i. Funding Mechanisms: Debt vs. Equity
ii. Classification of Financial Markets
2. FINANCIAL INDICES (1 week) (a) Standard & Poor's 500 (b) NASDAQ (c) NYSE Composite (d) Dow Jones (e) Applications of Financial Indices (f) Indices Construction (g) International Indices
3. FINANCIAL INSTRUMENTS (2 weeks) (a) Stocks (b) Bonds (c) Derivatives i. Futures ii. Options iii. Mutual Funds (d) Alternative Financial Instruments i. Open Capital and Close Capital Funds ii. Index Funds iii. Exchange Traded Funds iv. Hedge Funds v. Real Estate Investments
4. FINANCIAL MATHEMATICS (1 week) (a) Net present value (NPV), simple interest and compound interest (b) Annualized compound interest rate vs. nominal interest rate (c) Rent (d) Fixed-income instruments valuation i. Bond value ii. Price-return relationship
5. MONEY MARKET (2 weeks) (a) Market participants i. Central banks ii. Interbank markets (b) Interbank rates (LIBOR) (c) Money markets risks i. Credit risk ii. Market risk
iii. Liquidity risk (d) Money market instruments
6. FIXED-INCOME MARKETS (1 week) (a) Characteristics of bonds i. Fixed-income markets location (b) Market participants i. Issuers ii. Brokers iii. Investors (c) How bonds are traded? (d) Fixed-income markets classification i. Classification based by Markets ii. Classification based by interest (Coupon) iii. Classification based in nominal payment iv. Classification based in lender class v. Classification based in equity characteristics
7. FIXED-INCOME MARKETS (1 week) (a) History of the FOREX market i. Gold standard, 1880 {1914 ii. War period, 1919{1939 iii. Bretton Woods, 1946{1971 Floating rates, 1971 to the present (b) FX market participants (c) SWIFT Codes (d) Trading mechanisms of FX market (e) Types of FX contracts (f) FX spot market (g) Two prices (h) Types of FX quotes (i) Cross exchange rates
8. EQUITY/STOCK MARKETS (1 week) (a) Characteristics of equity markets (b) Functions and objectives of equity markets (c) The stocks (d) Methods for issuing stocks (e) Efficiency of stock markets
Evaluation
Course evaluation will be done as following:
1. One case study (Goldman UDEM Investment Banking - Risk Management Department) presented and evaluated by 3 risk management written reports in English, that occur during the partial and final exam dates, and three presentations, that occur during the partial and final exam dates. There will be 3 (three) evaluations during the semester. The fi nal grade will be a weighted average of the three exams:
1. Partial Exam 1 - 22/02/2017 - 30% (Research, Sales and Trading Report). 2. Partial Exam 2 - 29/03/2017 - 30% (Research, Sales and Trading Report). 3. Final Exam - 17/05/2017 - 40% (Research, Sales and Trading Report).
On the Final exam, the groups will present jointly the reports (15 mins presentations in English), and this will have a weight of 30% of the reports for that exam, with the other 70% corresponding to the evaluation of written work. There will be four grades during the presentation: the upper grade will be the presentation grade +2 points for the best presenter, +1 point for the second best, -1 point for the third best, and -2 points for the worst presenter. A report that is not presented on time will have zero grade.
It will be considered approved the student with minimum assistance that obtains a total grade superior to 70 from the three evaluations. Will be considered failed the student with less than 70 points (69.5, for example). The student with more than 3 weeks of nonattendance will not be able to participate in the final exam.
References
[1] JORION, Phillipe. Financial Risk Manager Handbook. Fourth Edition. New Jersey, John Wiley & Sons, 2007. [2] JORION, Phillipe. Value at Risk: The New Benchmark for Managing Financial Risk. Second Edition. New York, McGraw{Hill, 2001. [3] CHOUDHRY, Moorad. An Introduction to Value-at-Risk. Fourth Edition. New Jersey, John Wiley & Sons, 2006. [4] ALEXANDER, C. Market Risk Analysis, Volume I: Quantitative Methods in Finance. West Sussex, John Wiley & Sons, 2008. [5] ALEXANDER, C. Market Risk Analysis, Volume II: Practical Financial Econometrics. West Sussex, John Wiley & Sons, 2008. [6] ALEXANDER, C. Market Risk Analysis, Volume III: Pricing, Hedging and Trading. West Sussex, John Wiley & Sons, 2008. [7] ALEXANDER, C. Market Risk Analysis, Volume IV: Value at Risk Models. West Sussex, John Wiley & Sons, 2008.