Financial Markets

• Credit value: 30 credits at Level 7
• Convenor: Kenjiro Hori
• Assessment: a three-hour examination (80%) and coursework (20%)

This module aims primarily to familiarise you with the principles of finance. It will introduce you to the characteristics of equity, fixed income and derivatives markets, and provides grounding in financial models that would enable you to evaluate different financial assets. You will be introduced to option pricing theory, as well as to issues related to credit risk.

You will be equipped with the necessary knowledge of financial markets, ready to work as a practitioner in the financial industry.

By the end of this 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.