Programme Content Part 1 (Compulsory Modules)

  • Securities, Futures and Options
  • Fixed Income and Equity Investments
  • Quantitative Methods for Finance
  • Financial Markets

Securities, Futures and Options

Convenor: John Board
Credits: 20

Aims:

Introduces techniques for analysing and valuing different classes of risky assets. It also develops ways of optimally selecting portfolios of such assets and develops models of how these portfolios may be priced in financial markets. The techniques introduced in this module are widely applied in other elements of the programme.

Outline Content:

  • Financial assets and investing in securities markets
  • Investors and their objectives
  • Risk and capital allocation
  • Optimal portfolio selection
  • Capital asset pricing model
  • Single index and multifactor models
  • Arbitrage pricing theory
  • Derivative securities and the no-arbitrage principle
  • Forwards and Futures contracts; simple hedging
  • Options basic properties and trading strategies
  • Option pricing

Fixed Income and Equity Investments

Convenor: John Evans
Number of credits: 20

Aims:

Applies general valuation methods to specific financial instruments: fixed income and equity securities. It describes the basic characteristics of each security and develops practical strategies for finding its value and assessing its risk. It develops general trading strategies for each type of security. It also considers how the markets for these securities are related and begins the task of showing how these relationships can be exploited to form an optimal investment strategy.

Outline Content:

  • Sovereign and corporate bonds: Characteristics, prices and yields
  • The Term and risk structure of interest rates
  • Bond risk
  • Bond management: Active and passive strategies
  • Credit and credit default swaps
  • Securitisation
  • Top down fundamental management: Economic and industry analysis
  • Equity valuation I: Dividend growth, P/E ratios and earnings multiples
  • Financial statement analysis
  • Equity valuation II: Estimating share price and market strategies
  • Empirical evidence on market efficiency

Quantitative Methods for Finance

Convenor: Carol Alexander
Number of credits: 20

Aims:

The objective of the module is to give students a thorough grounding in the essential mathematics required for their Part II modules. The course is focussed uniquely on financial applications, with all the main concepts illustrated by numerous examples and Excel spreadsheets. The very high practical content will make it accessible to all students, even those with little previous training in mathematics.

Outline Content:

  • Foundations
  • Descriptive Statistics
  • Calculus
  • Linear Algebra
  • Probability Theory in Finance
  • Regression
  • Numerical Methods

Financial Markets

Convenor: Alfonso Dufour
Number of credits: 20

Aim:

Knowledge of global financial markets, the importance of liquidity, the distinction between exchange versus OTC markets, primary and secondary markets and the role of intermediaries in their various forms. Participants will gain an understanding of: international stock and bond markets, ‘repo’ markets (for borrowing/lending on a secured basis); an introduction to foreign exchange and money markets, and to futures markets (which are developed in more detail in optional Part 2 modules); finally specific markets for commodity and energy are studied in more detail.

Outline content:

  • 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 intermediaries in their various forms
  • Short-term debt securities issued by government and corporations.
  • Classification of bonds according to issuer: government, agencies, corporate and municipal
  • Comparison of bond markets in major countries and a description of the main intermediaries and their role.
  • Foreign exchange market – quotation conventions, types of brokers, central banks’ policies,
  • Primary and secondary stock markets. Market mechanics including types of orders, market participants, margin and short trades
  • Futures markets: a comparison of the main exchange traded markets, options on futures, specifications of the most popular contracts, trade orders for futures contracts, mark-to-market procedure, and various expiration conventions
  • Commodities markets: Specific features, delivery and settlement methods, backwardation and contango, short squeezes and regulations
  • Energy markets: price risks of oil and gas, electricity, coal