Faculty of Business: Finance and Economics
Credit points: 6 cp

Subject level: Postgraduate

Result Type: Grade and marks

Handbook description

This subject aims to produce an understanding of the functioning of financial markets and the instruments traded in them. It also deals with the fundamentals of pricing of various kinds of financial securities and derivatives, such as fixed income securities, foreign exchange, stocks, forwards and futures options and swaps.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

1. Have an understanding of the functioning of modern financial markets
2. Have an understanding of the main instruments traded in financial markets such as fixed income securities, foreign exchange, stocks, swaps, forwards and futures
3. Have an understanding of the fundamentals of the pricing of various kinds of financial securities and derivatives.

Contribution to graduate profile

This subject is an integral part of the Masters of Quantitative Finance providing an understanding of the instruments, institutions and markets that exist around the world. The subject develops the essential concepts at an advanced, quantitative level, while emphasising practical applications of current importance. Many of the concepts covered in this subject are further developed in later subjects in the Masters of Quantitative course.

Teaching and learning strategies

The subject will incorporate a range of strategies including simulations, readings and case studies.

Content

• Securities-calculation of yields
• Bond markets-calculating bond prices, duration and yields
• Equity markets
• FX markets
• Forward interest rates and yield curves
• FRAs and interest rate swaps
• Yield curve analysis
• Interest rate hedging
• The mechanics of option markets.

Assessment

Assignment (Individual)	30%
Individual assignment will be used to assess the ability of course participants to arrive at a sound understanding of financial markets using relevant financial techniques. These assignments will enable students to demonstrate that they have met objectives 1-3.
Final Examination (Individual	70%
The final exam consisting of multiple choice and short answer questions will test students' knowledge and competencies in applying financial techniques to solve problems. This exam will allow students to demonstrate that they have met objectives 1-3.

Examinations will be conducted under University examination conditions, and hence thoroughly address concerns regarding secure assessment. The assignment will be secured through a combination of updating of assessment tasks across semesters and/or plagiarism detection software.

Recommended text(s)

A Book of Readings will be provided.

Indicative references

Fabozzi, F. J., (1992) Fixed Income Mathematics: Analytics and Statistical Technique, Irwin.

Tuckman, B., (1996) Fixed Income Securities, Wiley Frontiers in Finance.