Having completed this unit, the student is expected to:

• Critically assess theoretical concepts applicable to the financial markets;
• Communicate and critique the functioning of the financial markets;
• Solve complex problems to assist in financial decision making;
• Demonstrate an in-depth knowledge of appropriate research techniques in the field of the financial markets;
• Conduct effective research in the field of the financial markets by synthesising and analysing concepts in a meaningful way.

• Introduction to financial markets
• Capital markets and asset valuation
• Asset price volatility
• Diversification, efficient portfolios and market portfolio
• Capital Asset Pricing Model and Efficient Market Hypothesis
• Behavioural finance
• Bond pricing, duration, convexity and credit default swaps
• Term and risk structure of interest rates
• Forex market, purchasing power parity and interest rate parity
• Derivatives: Futures, Forward and Option contracts
• Trading strategies using derivatives
• Other contemporary issues in financial markets

Lectures (3 hours/week)

The assessment of the unit is based on two written courseworks, four take-away tests and a final written exam.

The final grade is based on the following weights:

Take-away test: 20%

Written courseworks: 30%

Final written exam: 50%

Written examinations deal with issues of in-depth understanding of key concepts, comparative evaluation of competitive theories and solving numerical problems related to the content of the course. Exam papers and take-away tests comprise multiple-choice questions and open questions.

Use of Information and Communication Technologies (ICTs) (e.g. power point) in teaching. The lectures for each chapter are uploaded on the e-class platform in the form of ppt files, which the enrolled students can freely download.